Uncertainties about political and fiscal issues in Brazil have brought greater volatility to the Ibovespa, the country’s main stock index.
Analysts expect that these uncertainties, added to the environment of higher interest rates, international news and fears about the delta variant of the coronavirus, will continue to bring fluctuations to the Brazilian Stock Exchange over the next few days.
Given this scenario, individual investors withdrew R$ 1.2 billion from the Stock Exchange last week alone, when the Ibovespa accumulated a drop of 2.59%. Institutional investors ended up with a negative balance in the period of R$5.2 billion.
Sales also exceeded purchases of assets between investment clubs and financial institutions, which closed with a negative balance of R$190.9 million and R$549.2 million, respectively.
In total, considering all investors, the balance of trading on the Stock Exchange was still positive this week at BRL 91.8 million – the result of the inflow of BRL 5.2 billion in foreign capital, of BRL 2.1 billion per share from public and private companies and R$ 20.3 million from other types of investors who took advantage of the fact that shares were cheap to go shopping.
“Yesterday [semana passada] it was a global chaos, and today it seems that we are living in Switzerland”, said the variable income director at Veedha Investimentos, Rodrigo Moliterno.
Although fears about an economic setback – which dyed the Ibovespa red for most of last week – remain on the radar, the improvement in the signals on fiscal issues has given a new boost to the Brazilian market.
This Tuesday (24), the president of the Chamber of Deputies, Arthur Lira (PP-AL), said that Congress will seek alternatives to guarantee fiscal responsibility amidst the impasse involving the payment of R$ 89 billion in court orders in 2022 and, despite having recognized the difficulty in voting the text of the bill that changes the Income Tax, he said that it is not an impossible process.
Court orders are government debts recognized by the courts. The statement helped the Brazilian stock market to rise 2.33% this Tuesday (24) to 120,210 points. The dollar ended in fall of 2.23%, to R$ 5.2610.
“Lira’s speeches helped a lot to alleviate the pressure on interest rates and on the dollar, making the shares perform well in this Tuesday’s trading session. But despite this relief in relation to doubts about the fiscal issue, the volatility [na Bolsa] it should continue because we still have many uncertainties in the country”, said the analyst at Terra Investimentos, Régis Chinchila.
The Brazilian market also benefited from the global optimism generated by the full approval of Pfizer-BioNTech’s Covid-19 vaccine in the United States and the appreciation of commodities in the international market.
“Pfizer’s final approval may increase acceptance of the vaccine in the United States and other countries,” says Fernanda Consorte, chief economist at Banco Ourinvest. “This could mean less spread of the virus and is positive for the global economy”, he assesses.
“Iron ore futures contracts recovered in China and this boosted shares in Vale, Siderúrgica Nacional, Usiminas, as well as shares in Gerdau,” says Flávio de Oliveira, head of variable income at Zahl Investimentos.
According to the analyst at Clear Corretora, Rafael Ribeiro, investors took the opportunity to buy shares in companies that were cheap, which contributed to boost the index.
Among the positive highlights, Vale rose 3.65%, supported by the recovery in iron ore prices. Petrobras closed with an increase of 2.07%, expanding the gains of the day before, on another day of high oil prices in the market, with Brent rising 3.35%, compared to more positive prospects for the demand for the commodity.
Cyrela soared 12.33%, amid the relief in future interest rates, against the backdrop of a Bradesco BBI report assuming the company’s coverage with an “outperform” recommendation for the shares.
The shares of Gol jumped 10.97%, in a positive session for shares in the travel sector, another reflection of the approval of the vaccine against Covid-19 in the United States. Azul (7.3%), CVC Brasil (6.38%) and Embraer (8.13%) followed this trend.
Lojas Americanas advanced 11.81%, with the more buying climate supporting some recovery, although it still accumulates a loss of around 17% in August, in the wake of adjustments related to the merger of certain assets of the company with the former B2W, now called Americanas .
“In addition to seeing an increase in foreign investors last week, the Exchange also tested the 116 thousand points and we saw several companies and sectors with interesting multiples [mais baratas], which offered a trigger for purchases”, said Ribeiro.
“Now it remains to be seen how this flow will be maintained, which depends on a reduction in political noise to help move the reform agenda forward,” said the analyst.
The shares of these companies ended up getting cheap after the sharp drops seen between August 16th and 20th, when the Ibovespa reversed the positive signal it had been carrying and accumulated a loss of 0.81% in the year until last Friday (20th). Last week, the index accumulated a loss of 2.59%.
With this Tuesday’s high, the Stock Exchange started to accumulate gains of 1% in 2021.
“We had a greater perception of risk last week, mainly due to political, economic and fiscal issues in Brazil, which ended up making local investors worried. Without a clear definition and with the increase of interest rates in the domestic market, there was an outflow of capital”, said Chinchila.
In addition to domestic instability, part of the explanation for the fall of the Stock Exchange came from fear of a slowdown in the pace of economic recovery in the world, which gained strength after the two major world powers (US and China) brought weak consumption, sales and production.
Another point of attention among investors is the maintenance of monetary stimuli by the Federal Reserve (Fed, the American central bank) and the annual symposium that this body will organize later this week.
Around here, Minister Paulo Guedes (Economy) and his team have increased the pressure in Congress on the effects on next year’s Budget, in case the payment of debts for court orders is not authorized.
There are also other agendas on investors’ radar, such as tax reform and a greater tendency for the Selic base rate to rise by the Central Bank, as a way of trying to contain the advances of inflation in the country.
The Original bank, for example, already expects the rate, currently at 5.25% per year, to close 2021 at 8% “in view of the perception of more inflationary risks for next year and the BC’s ‘unequivocal commitment’ to convergence expectations for the target in the relevant monetary policy horizon, he wrote in a report.
“I believe that the interest issue is more related to the political moment. In the fiscal sphere, they scream and scream, but they are resolved, but the political scene is a little more complex”, said Moliterno.
The political crisis generated by the reelection attempt of President Jair Bolsonaro (no party), which has discredited the electoral process and confronted Supreme Court justices, continues to weigh on investors’ perceptions.
“But I believe that all this uncertainty in the domestic scenario can calm down now in early September, with a conciliation for the vote on the Budget Guidelines Law for 2022. This should at least bring the fiscal issue to a final conclusion”, added the executive .