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brazil emerging markets FX Markets

And Now, Everybody Will Buy Everything Related To Brazil …

Who's excited?!

Well, Petrobras is having itself a banner day thanks to Jair Bolsonaro who damn near captured enough of the vote in the first round of Brazil’s closely-watched elections to actually avoid a runoff later this month.

There are a ton of upgrades on Monday, with the most notable (I guess) being BofAML’s Buy from Neutral call on the ADRs (PT is now $20 from $17). JPMorgan got in on the act too. This is predicated on the assumption that Bolsonaro will be less interventionist when it comes to critical state assets.

“We believe the market, at least initially, will respond favorably to a victory (probably second round) of Jair Bolsonaro”, BofAML wrote last week, in a note documenting the likely outlook for Petrobras following the elections. “His proposed economy minister, Pablo Guedes, is respected by the market and he has already discussed some of his plans including privatizations”, the bank continued.

That’s the gist of it, and at one point on Monday, shares were up some 13%. They’ve since pared gains, but are still on pace for a stellar day.

Petr

Meanwhile, the yield on the company’s 2025s plummeted the most in years:

Yield

(Bloomberg)

Brazilian stocks in general rose sharply as well, as expected. The Ibovespa is up the most intraday since March of 2016:

Brazil

Notably, the real is bucking the EM FX trend, surging amid generally sour sentiment for emerging markets following the worst week for EM equities since February and overnight losses for the yuan.

Real

(Bloomberg)

Whether all this euphoria is sustainable remains to be seen, but for the time being, I guess we’re going with it.


 

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3 comments on “And Now, Everybody Will Buy Everything Related To Brazil …

  1. Anonymous

    Bolsanaro is another neo-populist and for whatever reason people are giddy over these charlatans. I’m wondering how long it takes before reality reasserts itself here, but this is easily the most damaging global political phenomena to metastasize since the end of WWII. The idea of running a country on the principles of profligate and irresponsible fiscal policy, coupled to extreme cultural and social regressive policy to maintain popular by whipping up nationalistic fervor is a dangerous, unsustainable combination and every time its been tried before its ended… tragically.

    • Be that as it may, the former communist guerilla fighter, Dilma Rouseff, ran the country into the ground in her tenure as President.

      • Anonymous

        Brazil and good governance aren’t really two subjects that are often talked about together, its true.

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