MW_ArticlePageView
The Brazilian stockmarket – the Bovespa – has been in carnival mood so far in 2006. For years, the exchange has been dominated by banks, extractors of raw materials and state-owned companies.
But that is changing, says The Economist, as a raft of initial public offerings (IPOs) come to the market. When Natura – Brazil’s answer to Avon, the door-to-door cosmetics retailer – floated on the Bovespa in 2004, it was the first IPO for two years. Since then, 18 companies have listed and another 20 are expected to do so in the next six months.
The debutantes are “exploiting a global and seemingly insatiable appetite for Brazilian securities”. Local bonds got a boost last month as the government exempted foreign buyers from tax on them – but equities have also been strong performers. Since the beginning of 2003, the Bovespa Index (which tracks the 57 most actively traded shares on the Sao Paulo market) is up nearly 300%.
And Brazilian stocks have been “dancing the Samba this year” – up 27% in the first two months of 2006. “We’re in a sweet spot for emerging markets, and Brazil represents that,” Paul Rogers, lead manager of the Scudder Latin America Fund, told David Berman of Canada’s National Post. But is this performance sustainable?
The market now trades on a p/e of 13 – compared to its historic average of 11.1 times – and anecdotal evidence points to worrying signs of “market fever”.
But a major problem is that export revenues are too reliant on natural resources. This has sent the currency as high as R$2.11 to the dollar from R$2.60 a year ago, and suggests that Brazil could be suffering from “the Dutch disease”, says Richard Lapper in the FT. The ailment was first felt in Holland in the 1970s when the Dutch were big oil exporters. An inflated currency then priced other Dutch exports out of international markets. Perhaps it’s “time to call the doctor” for Brazil, says Lapper.
Published in Stock-Markets
| More
articles
by
Annunziata Rees-Mogg
MW_RelatedArticlesFooter
Related articles
-
By John Stepek, Jul 18, 2008
-
By John Stepek, Jun 18, 2008
-
Jun 13, 2008
MW_MoneyMorningSubscribeFooter.ascx
FREE - MoneyWeek's daily investment email
Our free daily email, Money Morning, is an informative and enjoyable analysis of what's going on in the markets. Written by our Deputy Editor, John Stepek, and guest contributors.
Sign up, FREE, to Money Morning here.
