Brazil equities

Have investors yet again changed their minds about Brazil? After tanking for the first half of this year, Brazilian stocks have staged a recovery and on Tuesday reached their highest level since March 18. Over the past three months, as the chart above shows, they have comfortably outperformed the MSCI Emerging Market index and the S&P 500, and have left in the dust their rivals to the north in the form of Mexico’s IPC index. 

Here’s another reminder of just how dependent Brazil’s economy is on China’s.

Brazil’s Bovespa index surged 3.1 per cent to 48,928.82 on Thursday after China released stronger than expected trade data, fueling hope that the economy may be steadying after a rough start to the year. 

BTG Pactual has been tipped as an emerging markets “superbank” after its rapid expansion across Latin America and Africa over the past couple of years. Now the Brazilian investment bank is putting its superhero powers to use in its home market, it appears.

In March André Esteves, BTG Pactual’s billionaire controller, came to the rescue of Eike Batista, offering his crumbling oil and mining empire credit and management services. This week Esteves has swooped in to help power company CPFL Energia, taking the rather unusual decision to guarantee the IPO of its renewable energy unit CPFL Renováveis. 

One day Brazilian stocks are going to get cheap enough to lure the bargain hunters back in en masse. Alas Tuesday was not to be the day.

The Bovespa index suffered its steepest one day drop in nearly two years – closing down 4.2 per cent at 45,228.95, its lowest level since April 2009. This takes the bourse’s losses this year to 25.8 per cent, making it the worst performer among the the major markets. 

Votorantim Cimentos has announced its intention to raise $5.4bn through an initial public offering that will be the world’s biggest this year if realised.

In a filing to the Securities and Exchange Commission, Brazil’s largest cement company by sales said it planned to raise the money through a listing in Sao Paulo and an American Depositary Shares offering on the New York Stock Exchange.

 

Brazilian cement group Votorantim Cimentos has become the latest to join a queue of companies looking to launch initial public offerings in spite of a poorly performing market.

The cement company, part of the Votorantim conglomerate, is planning to raise more than $1bn from a dual listing in Brazil and New York, according to a person familiar with the matter.

 

Another day, another Brazilian company outlining plans for an initial public offering.

On Wednesday, Banco Do Brasil, Latin America’s largest bank by assets, said it was seeking to raise as much as R$12.15bn ($6bn) from the spinoff of its insurance and pension unit, BB Seguridade.

But talk is cheap. Given the lacklustre IPO market in Brazil at the moment the Bovespa index is down nearly 12 per cent since the start of the year can Banco Do Brasil pull off what would be the world’s biggest IPO so far this year? 

Investors’ attitudes towards Mexico have become unmistakably upbeat over the past year.

For proof, look no further than the latest Dealogic review of fundraising and dealmaking activities in Latin America. In the first three months of this year, Mexico has led the pack for both share sales and mergers and acquisitions – taking the crowns that previously belonged to Brazil. 

What is the dirty not-so-secret secret of Brazil’s capital market? The answer is here in this chart from Dealogic. (see after jump) 

Anyone who has ever worked in Brazil, set up a company or in fact tried to do anything in the country will feel their pain. Raymond James Financial said on Tuesday that it was shutting down its equity research unit in Brazil because of tax and regulatory hurdles. 

After rising pretty much in tandem Brazil and Mexico’s stock markets have diverged in recent months. Jonathan Wheatley, deputy emerging markets editor, analyses why Mexico has out performed and whether Brazil’s will rediscover its wings.

For all of you out there who can’t get enough of the Mexico versus Brazil debate, here’s something else to chew over: the diverging fortunes of the countries’ two stock markets.

Mexico’s benchmark IPC  index on Tuesday hit a record high for the third consecutive session while Brazil’s Bovespa continues to languish, having dropped 27 per cent since mid-March. 

Is the love affair between foreign investors and Brazilian equities on the wane? While the flight to safety has affected equity markets around the world, Brazil has been taking it to the chin more than others.

Equity funds pulled $1.03bn out of Brazil this May, according to data from EPFR Global. That is more than 1 per cent of the funds’ Brazilian equity holdings at the beginning of the month and is the biggest monthly outflow since August 2011.