Brazilian stock exchange and currency are among the most vulnerable to China’s slowdown, says American bank – 09/20/2021 – Market

The Brazilian currency, as well as the country’s stock exchange, are among the most vulnerable to a scenario of strong economic slowdown in China.

The analysis is by economists Brendan McKenna and Jessica Guo, from the American bank Wells Fargo. In a report published on Monday (20), they highlight that the slowdown in China’s economy due to measures to increase regulation by the government and the risk of bankruptcy of local market giants, such as the developer Evergrande, should reduce demand of the country by imported products, leaving economies more dependent on trade with the Asian giant in a situation of greater vulnerability.

Based on fluctuations in the currencies of a selected group of emerging countries against the Chinese currency since 2016, they point to the real, along with the currencies of countries such as South Africa, Russia, Poland, Mexico and Colombia, among the most sensitive to the cooling in the China’s growth rate.

According to the Wells Fargo report published this Monday (20), most of these countries have their economies highly related to the prices of commodities whose main destination is China.

Because of this, both the currencies, as well as the stock exchanges of these countries, respond directly to the fluctuation in the prices of these raw materials. “As a result, the currencies and stocks of each of these countries could come under pressure [com a desaceleração da China]”, write economists at Wells Fargo.

On the other hand, specialists assess that countries less dependent on the export agenda, with more diversified economies, such as India and Israel, tend to be the most resilient to the Chinese slowdown.

Both are commodity-importing countries, which may even benefit in a scenario of reduced demand for raw materials by China, point out economists at the American bank.