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Lula returns to power: opportunities and risks of the Brazilian market

Lula returns to power: opportunities and risks of the Brazilian market

“In principle, all this was stopped in Congress, with which, the focus Today it is about what type of transition PEC we are going to haveboth in amount and term of the concepts that are outside the spending ceiling, as well as in the names of the ministers,” Chialva described and added: “I see all the locals as very cautious, and in general I would dare to say that they are very pessimistic, coming from Paulo Guedes’ structural reform agenda and moving on to the old PT agenda.”

As for how investors view this scenario, the Delphos Investment partner said that global funds “are more optimistic since Lula implies Brazil’s return to the 2030 global agenda, with the sign of participating in Egypt at the COP”, as the other side indicated that Jair Bolsonaro, the outgoing president, was not “a character liked by global funds that now appear to be aligned with ESG practices.” “Lula’s arrival could change this and encourage the entry of external investors,” she predicted.

However, he noted “The initial optimism has now turned into an attitude of wait and see given that he did not like Lula post elections. The idea is for Brazil to return to the 2030 global agenda but without neglecting internal affairs.”

Where to focus when investing

To its turn, Gustavo Neffa, partner at Research for Traderssaid that “we had a scenario of a real converging to 5 that may not be so logical after what Lula said about the fiscal issue and the independence of the Central Bank. We are a little more negative than in the initial report we made after Lula’s victory. We see opportunities in the stock market.”

In fixed income, he assured, it will probably follow the course of what happens internationally. In this regard, he recalled that it is a complex year for emerging markets despite the fact that certain signals are coming from the United States where it will probably loosen up with the rise in interest rates from the Fed after the latest wholesale inflation data.

“We like companies focused on domestic consumption”Gustavo Neffa said and remarked which sector he sees as more complicated: “Exporters are still excessively dependent on international prices that are falling.” Regarding this, he indicated that China is in a complex situation and that Europe and the United States will enter recession, the second probably next year. “We are witnessing a poor demand for commodities, which is why they adjusted prices a lot after the Russia-Ukraine war. In May there were phenomenal falls,” he recalled.

In the report of Research for Traders remember that “whoever wants to bet on MSCI Brazil with a lot of liquidity, you can do it through the iShares MSCI Brazil (EWZ) ETF”. By sectors, among financial companies it is mentioned Itaú Unibanco, Banco BTG, Banco do Brasil, Santander Brasil and Banco Bradesco. On the telecommunications side, stand out Telefonica Brazilin the Utilities sector, Centrais Eletricas Brasileiras and AmBev in basic domestic consumption.

Source: Ambito

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