Monday, September 27, 2010

Brazil's Stocks Free and Set To Rise With PBR's IPO

Isn't this chart amazing:

+381% for PBR and +309% for PBR. Wow. Notice also the correlation between the two.

The Brazilian ETFs: EWZ, BRF, BZF (currency).

With the frest $72B record IPO and the start of trading of new shares of Petrobras this week, the Main Brazilian Stock Exchange, Bovespa, tends now to be in upward trend and should end the year with a better than expected return, according to experts in the stock market.

The reason for the statement is simple: Bovespa, São Paulo's main stock index, is strongly affected by the movements of Petrobras - which, next to the Vale, has greater index weight. This means that if the capitalization of Petrobras works as expected by the experts, Bovespa will show the same positive reaction.

"What held the Bovespa index nack this year was exactly the capitalization of Petrobras, which was slow to take off" says investment manager Fabio Colombo. "The capitalization was instrumental. Now, the outlook for the Brazilian stock market is very positive," added Celso Grisi, a finance professor at the Institute of Accounting, Actuarial and Financial Affairs (Fipecafi).

Until the beginning of the month, before the publication of a prospectus that gives rise to capitalization, shares of Petrobras suffered a nearly 30% drop. The Bovespa index followed.
Ricardo Almeida, professor of finance at Insper, who is accompanying the capitalization process closely, said that from now on Petrobras will returns that will be normal or slightly higher.

Adams explains that technically "normal return" mean gains of 5.7% per annum above the average of fixed income.
Among the analysts surveyed, George Sander, Equity Strategist at Infinity Asset Management, is less optimistic about the performance of Petrobras and the Brazilian market. "The market will drag on for a while," he says. In the process of capitalization, the state has distributed 4.3 billion new shares, including common and preferred. But Sander agrees that Petrobras may show a good reaction with the capitalization, which will greatly boost investment power. "And the Bovespa index only rises if Petrobras rises too."

With news from O Estado de Sao Paulo.

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