Foreigners invest US$9.6 billion in Brazil’s stock market through June, highest amount since 1994

RIO DE JANEIRO, BRAZIL – The first half of 2021, full of positive surprises for the Brazilian economy, brought a record balance of foreign investment in the local capital market.

According to B3, as of last Wednesday, June 30, these investors had invested R$48 billion (US$9.6 billion) in the cash market, not including IPOs. This is the best performance in the historical series compiled by Estadão/Broadcast, going back to the Real Plan in 1994.

A combination of factors explains this inflow, such as improved forecasts for this year’s GDP, higher commodity prices in the international market, and higher interest rates that attracted foreign funds to the country.

Since January, foreign investment in the stock market is double the previous record of R$21.5 billion recorded in the first half of 2015, but conditions are now contrary. In recent months, Ibovespa reached record highs as the market raised its forecasts for its growth after better than expected indicators.

According to the Central Bank’s Focus report, the financial market expects Brazilian GDP to rise 5% this year. A month ago, it expected a peak of 3.5%.

That influx should continue, and other factors are coming into play. Alexandre Almeida, an economist at CM Capital, observes that the SELIC rate has begun to rise and is likely to reach new highs, attracting more foreign capital. “A more favorable environment for foreigners has emerged, with the signaling of higher rates, and this tends to intensify, with the recent act of Copom, which signaled that these increases should not be partial,” he says.

According to Ermínio Lucci, CEO of brokerage BGC Liquidez, foreigners should look to Brazil for emerging commodity producers, which tend to benefit from the recovery of the global economy, thanks to the favorable external scenario. “Estimates for global growth in 2021 are between 4.5% and 5%, which I think is robust,” he says. “I think this positive flow of foreigners into the equity market should continue throughout the year.”

Ronaldo Patah, chief strategist at UBS Consenso, also sees higher demand for commodities driving foreigners into the Brazilian stock market. “China, one of the countries that coped best with the pandemic, continues its robust growth, and our supply of commodities corresponds exactly to Chinese demand (ore, pork, beef, chicken). In this case, Brazil is one of the countries that benefit the most from emerging markets.”