SAO PAULO (Reuters) – Brazil’s Bovespa has rocketed to a 6.6 percent gain so far this year, making it the world’s second-best performing stock market, but exchange data shows a persistent exodus of foreign capital in the early days of a new market-friendly administration.
Many foreign investors remain reluctant to raise their exposure to Latin America’s largest economy after getting burned by volatility in the past, as with a lengthy market bust starting in 2011 that followed a commodities-fueled bubble. They are looking for more than cheery rhetoric from newly elected President Jair Bolsonaro, many market watchers said.
Daniel - Gewehr - Head - Latin - America
Daniel Gewehr, head of Latin America Equity Strategy for Santander Brasil in Sao Paulo, citing his close contact with foreign stock investors, said many are waiting for concrete signs of progress, particularly on a pension reform that may struggle to win support in Congress.
“They don’t expect necessarily the approval of the pension reform in short-term, but a positive momentum that would come with actions such as a privatization plan or implementing a proposal for central bank independence,” he said.
Leader - Advisors - Chicago - Boys - Ties
The far-right leader and his economic advisors, dubbed the “Chicago boys” for their ties with Nobel laureate Milton Friedman’s alma mater, have promised to cut the country’s large budget deficit, privatize a raft of state-owned companies and open the economy to more competition.
Those pledges have been music to the ears of investors in general, but particularly local funds, who have been key actors behind the recent rally.
Signs - Bolsonaro - Minister - Paulo - Guedes
Most remain eager for signs of how Bolsonaro and his Economy Minister Paulo Guedes will tackle the country’s public debt, now at around 77 percent of GDP.
An improvement on that front could bring down long-term interest rate futures, something that would...
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