XP strategists talk about IR reform and reduce Ibovespa projection to 135,000 points in 2021

Strategists Fernando Ferreira and Jennie Li, from XP

SAO PAULO – Strategists Fernando Ferreira and Jennie Li, from XP, made this Wednesday (2) a panel of expectations for the Ibovespa in 2021, in which they reduced the broker’s projection to the level of the index at the end of the year.

From 145,000 points, B3’s main equity benchmark is now expected to end 2021 at 135,000 points. The forecast is based on a weighting of profit expectations for the next two years of companies that make up the Ibovespa with long-term interest rates, which rose sharply throughout the year, but mainly in August.

“The nominal interest on the CDI curve, as well as the real ones, measured by the NTN-B [Tesouro IPCA], rose a lot in August. There was a contract that went from 7.5% a year in early 2021 to 11% a year now”, explains Ferreira.

For the chief strategist at XP, this movement reflects the fiscal noise that took over the news in recent months and caused a detachment between the performance of the Brazilian stock market and that of other countries. “Brazil is only better than Asia, falling 2% in the year, while Asian stock markets fall 5%”, he comments.

In Ferreira’s opinion, one of these risks closely monitored by investors is precisely the reform of the Income Tax, which was approved yesterday in the Chamber of Deputies.

According to Jennie Li, the markets were mainly concerned with the extinction of Interest on Equity (JCP) and with the taxation of dividends. “JCP is considered a financial expense, so it reduces taxable income and, consequently, how much tax the company pays”, recalled the strategist.

According to Jennie, the end of the JCP has an average impact of 5% on the aggregate result of companies on the Exchange. However, she recalls that in some cases this effect is mitigated by the average reduction of 8% in Corporate Income Tax, which was also included in the text of this reform as compensation.

Jennie explains that the companies most negatively affected by the changes are banks, B3 itself (B3SA3), insurance companies, retailers and malls. Ferreira also recalled that it was precisely the shares of these companies that devalued the most in this Wednesday’s trading session.

The XP strategist considered that, with a 15% tax rate on the distribution of dividends, companies will be encouraged to retain more profits to invest in the operation itself, instead of distributing this capital to shareholders.

However, she points out that this is not equally true for all companies, as companies with a lower growth avenue such as large banks will end up suffering more, while those that effectively need to invest more to expand will benefit marginally.

Jennie also made a point of remembering that the text of the IR reform is still going to the Senate, so it is not possible to guarantee that this will be the final wording of the bill. “Some changes can still happen, so it’s too early for investors to make changes to their strategy. It is worth remembering that the initial project included the taxation of dividends from real estate funds, something that was withdrawn, with a very positive effect for this market.”

On the other hand, she regrets that this part of the tax reform still does not address the main problem of the Brazilian tax system today: complexity. “Our tax system continues to be very complex”, he concludes.

To understand how to trade the stock market through technical analysis, sign up for the free course A Hora da Ação, with André Moraes.