Raízen (RAIZ4), São Martinho (SMTO3) and Arezzo (ARZZ3): the candidate shares to integrate the new Ibovespa portfolio

B3 regularly reassesss the shares that make up the Ibovespa portfolio to verify whether the assets meet the criteria to be part of the index that represents the most traded securities on the Brazilian stock exchange. Rebalancing occurs every four months: in January, May and September.

The definition of the assets included/excluded from the portfolios is determined based on calculations made by B3 itself and the official previews of the portfolios will be released on August 1, August 16 and September 1, with definitive replacements on September 5, 2022

In general, the shares of Arezzo (ARZZ3), Raízen (RAIZ4) and São Martinho (SMTO3) are the favorites to start composing the Ibovespa list. In reports from Credit Suisse, Itaú BBA, XP Investimentos and Morgan Stanley, the shares of the fashion retailer and the ethanol and sugar producers are unanimous among analysts.

Running around the outside, are the ordinary shares of the CBA (CBAV3), appointed by Morgan Stanley as one of the possible names to be included in the Ibovespa.

On the side of exclusions, only Credit Suisse and Itaú BBA bet on the exit of the shares in the September rebalancing, while XP and Morgan Stanley did not indicate possible withdrawals.

BBA and Credit Suisse converge on the exclusion of the ON shares of JSHF (JHSF3). In addition to JHSF, the Swiss bank believes that Positivo’s common shares (POSI3) will exit the index.

Check the probable weights that shares may have on the new Ibovespa

  • ROOT4: For Morgan Stanley, it will represent 0.3% of the index; for BBA, 0.28% and, for XP, 0.27%
  • ARZZ3: For BBA and XP, they would gain 0.22% of the index and, for Morgan Stanley, 0.3%
  • SMTO3: For BBA and XP, it would be 0.26% of the Ibovespa, and for Morgan, with 0.26%

In part, all this movement of which stock can enter the Ibovespa is closely monitored by the fact that a possible inclusion tends to benefit the shares. This is because, according to the XP analysis team, shares included in the index are the target of purchase by the funds, which increases their trading around the announcement and rebalancing date, which can cause a temporary price increase.

In addition, passive funds and ETFs, those that seek to replicate the index’s return, start to buy the assets added to the Ibovespa. With this higher demand, the stock price tends to rise over time.

“We found that: the stocks included in the index appreciated, on average, 6.6% in the 30 days before the rebalancing”, explains XP. “Removed stocks were, on average, down -20.7% in the 30 days before the rebalance.”

Weight changes for stocks in the index

Finally, in addition to debating who enters and who leaves the Ibovespa, analysts also commented on the possibility of shares gaining or losing importance within the index – mostly following the same parameters.

“We estimate the possible weights that each stock should have in the index, based on the market capitalization of the free float of each company. The main changes projected were for: 1) VALE3 (from 15.05% to 17.39%), 2) PETR3 (from 4.52% to 5.98%), and 3) RENT3 (from 2.17% to 1.67%)”, comments XP Investimentos.

“A special point of attention during the rebalancing period is in relation to Eletrobras ELET3. In June, the Brazilian electric power company was privatized in a share offering, raising more than R$29.3 billion and increasing the total number of free float shares. The free float of ON shares increased from 356.6 million at the end of April to 1,159 million shares. Thus, considering the updated number of shares, analysts project the weight of ELET3 at 2.54% (+0.23% of the current composition).”

Morgan Stanley sees Rede D’or (RDOR3) and Petrobras common shares gaining importance in the index, an increase of 0.3 pp for both, while projecting a loss of representation for Localiza ( (RENT3;-0.5%), Vale ( -0.4%), JBSS ( (JBSS3; -0.2%) and Iguatemi units ([ativo=IGT11]-0.1%).

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About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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