Following Wednesday’s political shocks, Brazil’s stock market plummeted so rapidly that it closed by midday on Thursday. The latest political crisis, engulfing the most senior figures in Brazil’s political class, caused unprecedented blows to the real’s value.
Over the last few months, Temer’s austerity measures had generated increasing optimism and confidence among investors in Brazil’s future. But on Thursday, scores of rattled investors began shedding their stakes in Brazil, and the real took its biggest tumble since 1999.
However, this looks to be short-lived: by Friday morning, the Brazilian stock market was already showing some signs of recovery. The real began to climb in value again and stabilize, while Ibovespa added 1.69 percent.
Why is Brazil’s stock market showing signs of recovery?
Despite the chaos generated by the political crisis, some investors and fund managers are seeing opportunities. With or without President Temer and his proposed reforms, Brazil still holds promise for investors.
Some, seeing prices fall, see the chance to buy in to Latin America’s biggest economy. Brazil’s agribusiness industry remains steady, with strong harvests and an even stronger lobby influencing the political class. The country’s natural resources generate further potential interest, especially for longer-term investors.
Where are potential investors looking?
There are a few companies that look like hopeful prospects for Brazil. High-quality, well-established names appear to be a key deciding factor for potential investors.
Analysts believe Ambev SA, the Brazilian arm of Anheuser-Busch InBev, is promising. Experts say fuel distributor Ultrapar Participacoes SA also looks encouraging, as does dental insurer Odontoprev SA and mining giant Vale SA.
Others point to paper and pulp maker Fibira Celulose SA, which remained steadier than many others on Thursday’s stock market. Along with rivals Klabin SA and Suzano Papel & Celulose SA, Fibira Celulose’s exports could actually be cheaper in dollar terms thanks to the political crisis.