Bovespa index (.BVSP) has lost the majority of its first-quarter gains in recent weeks, pressured by intensifying election rhetoric and the impact of the central bank’s ultra-hawkish push to deal with inflation. Since the end of 2021, it has increased by 5.2%.
BUENOS AIRES/MEXICO CITY (Reuters)
This year, Brazilian stocks will rise less than predicted. Fears about the presidential election in October have ruined the outlook for the second half. As well as, double interest rates that encourage people to switch to deposit accounts, according to a Reuters poll.
According to the median forecast of 15 strategists questioned between May 12 and 24, the stock is expected to increase about 6.0% from 110,345 points to 117,000 points on Monday. However, it was lower than the expected numbers which is 125,000 points.
“We will experience tough election times since there are high interest rates for the coming years, and inflation all around the world,” said Andre Leite, partner and senior portfolio manager at Kairos Capital.
Concerns about the election’s transparency have worsened the atmosphere five months before the presidential election. This indicates a warning that Brazil could experience incidents like the 2021 U.S. Capitol riots.
Last week, a group of lawyers and legal experts said that President Jair Bolsonaro’s government is endangering Brazil’s democracy and judiciary’s independence. They claim that the voting system is likely to be fraudulent. Attacks on the judiciary and Brazil’s electronic voting system have led to fears. Some believes that he may refuse to accept loss in the October election to his opponent, former President Luiz Inacio Lula da Silva.
The First Quarter of The Year
In the first quarter, Brazilian stocks outperformed US stocks as commodity exports from Latin America’s largest economy. This can be an indirect beneficiaries of global trade disruptions caused by Russia’s invasion of Ukraine. In order to profit from Brazil’s high rates, which are presently at 12.75 %, more investors are now abandoning the risky Bovespa stock index and putting their money in safer bank accounts.
The S&P/BMV IPC index in Mexico is expected to rise 11.7 % from 51,376 to 57,400 points by year-end on Monday. The estimate was above the previous survey’s call of 57,050 points at the end of 2022.
However, the Brazilian stock market seems to remain optimistic. “Local company earnings continue to recover from the impact of the coronavirus outbreak. Mexico’s currency stability continues to support foreign investors.” So far in 2022, Mexican stocks have remained unchanged.
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Source: Reuters