Jpmorgan Brazil Investment Share Discussion Threads

[loganair] 11/10/2018 11:46

Ian Cowie: I may be nuts but I like Latin American trust now by Ian Cowie:


They say a drowning man will clutch at straws but this DIY investor was pathetically grateful to find one investment trust firmly in the blue when his screen was awash with red during the global markets sell-off on Monday.

While the FTSE 100 index of Britain’s biggest businesses slipped to a six-month low and other benchmarks fared even worse, an unloved emerging markets fund I have been holding onto out of sheer contrariness lived up to its name and emerged from the day with its share price 5% higher. On looking more closely, I see that it has risen by 12% in the last month, having lost a similar amount over the last year, but is 59% up over the last three years, according to data from Numis Securities.

Its name? Please don’t laugh but it’s BlackRock Latin American (BRLA).

Like many investors, I had grown so used to bad news from Brazil — in which the trust has nearly two thirds of its assets invested — that I had sub-consciously stopped looking at this long-standing holding because it hurt to do so when everything else was going well. Now the tide has turned elsewhere, however temporarily, BRLA has taken a turn for the better.

What’s going on? Perhaps counter-intuitively, politics can provide uplift for markets, as well as its more familiar depressing influences. It seems Brazil has woken up to the risk of turning into another Venezuela and the fifth-biggest electorate on earth has voted for a right-wing populist.

Jair Bolsonaro, a former army captain who talks nostalgically about Brazil’s military rule between 1964 and 1985, has a long way to go before gaining power but the prospect of socialism, higher taxes and confiscation, appears to be receding. Bolsonaro’s success in the first ballot was enough to boost Brazilian share prices and provide a bright feature amid the gloom this week.

More importantly, his pledges to cut tax, privatise state-owned businesses and reform ruinously unaffordable state pensions might form the basis for long-term economic recovery. Brazilians don’t need to be interested in political theory to see the practical consequences of the alternative ideology. Millions of Venezuelans are fleeing from the latest example of how socialists set out to create a paradise on earth but end up building an open-air prison where dissenters disappear.

But international investors should not really be surprised by the ‘Bolsonaro bump’. After all, the election of another right-wing populist in North America in November, 2016, was followed by a 50% increase in the Dow Jones index of US blue chip shares.

To trump that, so to speak, most economists and metropolitan media pundits — like me — are still sucking their teeth and warning that Bolsonaro will struggle to deliver medium to long-term economic growth. That may explain why BlackRock Latin American is trading at a 16% discount to net asset value (NAV). But I cannot resist pointing out we have heard such doom-saying before.

While none of us has a crystal ball, we can all take comfort from experts’ inability to predict the future in the past. Pole position in that fiercely-contested field of failure must go to the Nobel prize-winning economist Paul Krugman.

Immediately after Donald Trump’s election victory, Krugman sagely observed in the New York Times that: ‘If the question is when markets will recover, a first-pass answer is never.’

Since then the economist has been telling anyone who will listen that the president and his tax cuts — the biggest in 30 years — have nothing to do with the economy or share prices. Maybe so, but the recovery that never was seems to be going very well.

No wonder City traders define an economist as a man who knows 69 different ways to make love but doesn’t know any women. So this DIY investor intends to hang on to his stake in Brazil — even if naysayers claim I’m nuts.

[loganair] 08/10/2018 15:13

Brazil funds jump on right's surge in presidential race:


Brazil's stock market builds on rally after right-wing presidential candidate Jair Bolsonaro's resounding victory in first round vote.

Brazil's stock market has jumped after far-right presidential candidate Jair Bolsonaro's resounding victory in the first round of voting.

Bolsanaro bagged 46% of votes yesterday, more than 17% ahead of left-wing candidate Fernando Haddad.

Investors have latched onto Bolsonaro's ascent in the polls, as the right-wing candidate has made reform of the country's pension system, which has saddled the economy with big debts, one of his priorities.

The MSCI Brazil index has risen 17% over the last three weeks in dollar terms, buoying funds invested in the country.

Aberdeen Latin American Equity, Scottish Widows Latin American, Invesco Latin American and Neptune Latin America are all up by more than 10% over the same period.

Among investment trusts, shares in BlackRock Latin American have surged 17%, with a 6% jump today.

JPMorgan Brazil s up 6.7% over the last three weeks while Aberdeen Latin American Income has risen 8.4%, both lagging net asset value rises.

‘As much as anything this is the market breathing a sigh of relief that the left wing candidate Haddad, whose policies would not have helped Brazil get out of its current economic hole, will almost certainly not become president now,’ said Aberdeen Standard Investments head of emerging market sovereign debt Edwin Gutierrez.

Longer-term, Gutierrez was more sceptical on the effectiveness of a Bolsonaro administration, given the more fragmented congressional set-up.

‘Overall, power within congress is now going to be split amongst a larger number of parties,’ he said. ‘This is going to make the horse trading that is part and parcel of Brazilian politics more difficult.’

Fidelity emerging market debt portfolio manager Paul Greer expected ‘post-election euphoria to fade quickly’, should Bolsonaro be elected.

He said that Bolsonaro's PSL party's still relatively small presence in government, with 5% of seats in the senate and 10% of seats in the lower house, would make it difficult for Bolsonaro to pass legislation due to his far-right views.

‘Indeed, in the scenarios of a victory for either Jair Bolsonaro or Fernando Haddad, it is difficult to see either the political ability or willingness to enact fiscal reforms,’ said Greer.

Greer said this had been the most divisive election in Brazil’s history, illustrating the polarisation in domestic politics, as support for the country’s traditional parties all saw a sharp decline.

‘This election campaign has been dominated by issues such as security and corruption, which has helped the anti-establishment vote,’ he pointed out. ‘While Bolsonaro is now in a very strong position, we expect the next three weeks to be volatile for both polls and markets as the rejection rates of both Bolsonaro and Haddad are extremely high.’

Initial second round polls will also be important, Greer said, as markets understand the transfer of votes from eliminated candidates.

‘Haddad’s strong debating ability, and the equitable TV time between Bolsonaro and Haddad, will be other key factors to watch,’ he added.

Outside of the election, Greer said he expected Brazil’s fiscal balances to deteriorate and for its debt rating to continue to deteriorate.

‘Brazil’s growth remains sub-potential, and we expect it to remain sluggish for the foreseeable future’ he said. ‘We also feel Brazil’s monetary policy is too loose and interest rates need to rise given our expectations of higher inflation in Brazil over the next six to 12 months.’

[loganair] 03/10/2018 15:01

By Otaviano Canuto, former State Secretary for International Affairs at the Brazilian Ministry of Finance:

Brazil suffers from an excess of rules, which contribute to budget rigidity; fragmentation of service delivery; poor planning, monitoring, and evaluation of projects and policies; a lack of positive performance incentives for public-sector workers; the judicialization of policymaking; and an increasingly risk-averse bureaucracy.

Brazil thus needs to improve policy consistency, from planning through execution of programs and projects, and focus more on monitoring and evaluating results. Better coordination between the public and private sectors would also improve the capacity of public expenditure to contribute more to improving socioeconomic outcomes.

Brazil’s future hinges on the implementation of smart, gradual, and coherent economic reforms that facilitate productivity growth and put the country on the path toward fiscal sustainability. Whoever wins the upcoming election has a responsibility to address that imperative.

[loganair] 02/10/2018 13:42

Bloomberg Intelligence - Russia looks undervalued.

Brazil - hard to value, wait and see.

[loganair] 01/10/2018 10:37

Brazil’s business class is quietly rooting for far-right presidential candidate Jair Bolsonaro to win the nation’s highest office this month.

The nation’s currency and equity markets have increasingly rallied in lock-step with favourable poll numbers for Bolsonaro.

But his selection of a respected University of Chicago-educated banker, Paulo Guedes, as his economic advisor is good enough for many investors and business owners. Some view Bolsonaro as the least worst alternative in a race that is shaping up as a showdown between the far right and far left.

Pollsters are predicting a second-round run-off between Bolsonaro and former Sao Paulo Mayor Fernando Haddad, candidate for the leftist Workers Party.

Bolsonaro is the current front-runner among 13 presidential candidates heading into the first round of balloting slated for Oct. 7, with 27 percent of the likely vote, according to a survey last week from polling firm Ibope.

If no candidate wins a majority on the first ballot, as is predicted, the top two vote-getters will face off in a final round of voting on Oct. 28.

[loganair] 27/8/2018 12:02

How market-friendly are Brazil’s presidential candidates?


For the market and businesses, the next President should prioritize increasing productivity and fostering economic growth by creating certainty on what is yet to come in their Presidency. This can be done not only by setting specific and attainable economic goals but also by keeping a low level of volatility. In particular, market friendliness is measured by platforms that focus on an increase in investment—particularly in infrastructure—;maintaining a spending ceiling, reducing bureaucracy of the state, simplifying the tax regime, inserting Brazil into the global economy, committing to pension reform and increasing efficiency by privatizing certain state owned enterprises.

The top four candidates for market friendliness are particularly opposed to the interventionism and protectionism implemented by the governments of Lula da Silva and Dilma Rousseff that led to economic recession. Joao Amoedo, who ranks first in market friendliness is a candidate that is slowly becoming well known and increasing his percentage of vote intention. He is part of NOVO (“New Party”) political party, which stands for bringing a new viewpoint to Brazilian politics after years of dissatisfaction with the political establishment.

[loganair] 28/7/2018 21:23

Brazilian financial analysts reduced this year's inflation forecast to 4.1%.

Analysts maintained the 1.5% GDP growth forecast for this year as well as the 2.5% growth for 2019.

The exchange rate projection remained at 3.7 reais per U.S. dollar for the end of 2018 and the same 3.7 reais per U.S. dollar at the end of 2019.

[loganair] 03/7/2018 22:35

The good news:

Brazil’s trade surplus reached $5.882 billion in June, the nation’s Trade Ministry said today.


And now the not so good news:

Brazil's central bank cut its forecasts for economic growth and increased inflation projections as the economy deteriorated in the second quarter.

In its quarterly inflation report released Thursday, the bank forecast gross domestic product growth of 1.6% this year, down from the 2.5% forecast in the March report. In both cases, the figures were in line with market projections.

The government recently reduced its GDP expansion forecast down to 2.5% from 3%, while the markets on Monday lowered their projection for the seventh week running. Now set at 1.55%, the estimation has almost halved from the 3% predicted in January.

As for consumer prices, the bank forecast inflation ending 2018 at 4.2%, up from the 3.8% forecast in March but still below the 4.5% target.

[loganair] 29/6/2018 18:23

Invesco's Anness: why I'm buying emerging markets:

Invesco Perpetual Global Opportunities manager Stephen Anness has taken advantage of investment opportunities created by the emerging markets sell-off.



Stephen Anness, manager of Invesco Perpetual Global Opportunities has increased exposure to emerging markets following the recent sell-off.

‘The last two months have been a difficult time for anything emerging markets-related and we’ve been finding a number of opportunities where the common thread is emerging markets exposure,’ the manager said.

These include companies listed in an emerging market, as well as developed market companies viewed as an emerging market proxy due to their significant revenues from developing economies.

For example, Anness bought Sberbank, a state-owned Russian financial services company that was among the worst hit stocks from US sanctions launched against Russian oligarchs in April.

He has also increased the fund’s exposure to Brazil. Here, he bought shares in the country’s largest telecommunications provider Telefônica Brasil and small house builder EZTEC ahead of the general election in October. This has created uncertainty and resulted in market weakness.

The team also initiated a position in Santander earlier this year and hold Standard Chartered in the portfolio, two banks with significant emerging markets exposure.

Anness added that a number of Asian companies in the technology supply chain are currently on the radar, including Taiwan Semiconductor Manufacturing Company.

‘These are very good companies with very good balance sheets – some have come down by 20 or 30%. The to-do list is growing quite nicely with all of this volatility,’ he said.

Although it can feel counter-intuitive, Anness says investors must embrace volatility in order to tap into attractive investment opportunities.

‘As much as I dislike it in the short term and find it quite frustrating, I’ve always said we should embrace volatility. When everyone is nervous about life and people are losing their heads that’s the optimum time to be buying,’ the fund manager said.

When we find an idea, we fund it,’ said Anness. ‘I don’t want the tail of the portfolio to grow and have lots of irrelevant holdings take up too much time,’ he said.

Value bias:

While Invesco Perpetual Global Opportunities does not follow a strict value, growth, momentum or quality philosophy, Anness notes that the fund currently has a skew towards value.

The team looks for industry leaders – best-in-class companies that can compound value for many years to come – trading at a ‘substantial’ discount to their view of intrinsic value.

‘This discount affords us a margin of safety – a strong level of asymmetry,’ he said.

At the other end of the spectrum, the team invests in ‘special situations’. These are companies that are undergoing a turnaround under new management or have fallen out of favour because of a specific event.

[loganair] 09/6/2018 12:14

Brazilian equities extended their recent slide amid political and fiscal worries on Friday.

Stocks on the benchmark Bovespa stock index tumbled across the board for a fourth straight session, as traders continued to fret ahead of an unpredictable October election in which market-friendly candidates have failed to gain traction, according to recent polls.

Recent government intervention in oil company Petroleo Brasileiro SA has also caused traders to question the resolve of the current government - and the ability of the next one - to stay on a path of pro-market policies and relative fiscal austerity.

"It's still an uncertain scenario, without a positive conclusion coming to light for local financial markets," said a Rio de Janeiro-based trader.

[yf23_1] 03/6/2018 21:58

15% discount to NAV

[loganair] 03/6/2018 10:03

Mark Mobius tilts towards China, South Korea and is also bullish on Brazil and Russia where consumer Discretionary goods and services benefiting from domestic consumption growth in these countries.

"The opportunities are incredible for the right investment."

He remains optimistic in the emerging markets of Vietnam, China and India and believes we're going to see lot's of opportunities in these markets down the road especially India has got tremendous opportunities.

Mobius also small- and mid-size mainland Chinese companies public in Hong Kong. Fintech is a focus area, as is firms that assist traditional corporations to better deploy internet technologies. "That's where the growth opportunities are," he said.

"China is now a huge market, and it's growing because we are now getting more and more access," he said. “With the A-share market coming into the availability of foreign investors, the opportunities are incredible”.


He also says he expects a 30% correction in the US market as a result of massive out flows from ETF's. Currently global ETF stock assets stand at $4.7 trillion.

[loganair] 01/6/2018 10:44

Brazil's economic expansion continued in the first quarter as the country's vital agricultural sector expanded rapidly from the previous three-month period.

Gross domestic product grew a seasonally adjusted 0.4% in the first quarter from the last three months of 2017, and expanded 1.2% from the same period a year earlier, Brazil's statistics agency said Wednesday.

The agricultural sector grew 1.4% in the first quarter from the last three months of 2017, while contracting 2.6% from the same period a year earlier. Industry grew 0.1% in the quarter and 1.6% from a year earlier, while investment increased 0.6% in the quarter and 3.5% from a year earlier. Services expanded 0.1% in the quarter and 1.5% from a year earlier.

Household spending increased 0.5% in the quarter and 2.8% from the previous year. Government spending shrank 0.4% from the fourth quarter and decreased 0.8% compared with a year earlier.

[loganair] 25/5/2018 21:53

Even the normally bullish emerging markets champion Mark Mobius said there’s worse to come for emerging markets. According to the expert, there’s a danger of contagion from the deteriorating situation in Turkey, and Argentina and Brazil aren’t doing well. “We still could have some downside in the emerging markets. “But selectively, you have some good opportunities. Now would be a stock picker’s market,”

[loganair] 25/5/2018 21:44

Brazil's Bovespa equities index fell over half a percent on Friday, as a truckers'
protest entered its fifth day, hobbling a wide range of industries from aviation to agribusiness.

Negotiators for several truckers groups protesting high fuel prices had agreed on Thursday to suspend a nationwide highway blockade after the government vowed to subsidize and stabilize diesel prices, which may cost the state some 5 billion reais ($1.37 billion) this year.

But adhesion to the agreement has been spotty at best, with police saying on Friday that there were still blockades in 24 of the nation's 26 states, including 74 just in the state of Rio Grande do Sul, a key trade route with Argentina.

The key automaking sector ground to a halt on Friday, as did Santos, Latin America's largest port, while grocers' aisles went understocked and long queues formed outside gas stations.

In the early afternoon, the federal government authorized the military to clear highways by force, while Sao Paulo, South America's largest city, declared a state of emergency.

"Everyone is focused on the truckers," said a Rio de Janeiro-based trader. "The government has little or no negotiating room."

The Bovespa had fallen 0.6 percent by the afternoon. That fall would have been worse if it were not for a 2.1 percent rise by state-run oil major Petroleo Brasileiro SA, whose shares had previously tanked after the company cut diesel prices 10 percent, presumably to assuage truckers.

The announcement of subsidies by the government on Thursday made clear that the state, not Petrobras alone, would bear the brunt of the losses.

[loganair] 23/5/2018 15:32

The government of Brazil lowered its prediction for 2018 GDP growth from 3% to 2.5%, the Ministry of Planning announced on Tuesday.

In 2017, the Brazilian economy grew by 1 percent of GDP, ending a bitter two-year recessive cycle.


Inflation in Brazil unexpectedly slowed in mid-May to 2.7%.

The result undershot even the lowest estimate in the poll, Standard Chartered's forecast of 2.75 percent, and held well below the bottom end of this year's central bank target range of 4.5 percent, plus or minus 1.5 percentage points.

Double-digit unemployment rates and widespread idle capacity have kept a lid on price hikes as Latin America's largest economy recovers slowly from its deepest recession in decades, despite record-low interest rates.

While a selloff in the Brazilian real to a two-year low could generate inflationary pressures by boosting import prices, analysts say the weak economy is likely to curb the pass-through effect.

The central bank last week defied widespread expectations it would cut interest rates in a decision that was widely seen as a response to a weaker currency. The minutes from its meeting showed policymakers weighed a rate cut before ultimately
deciding to hold borrowing costs.

"The central bank made it clear at this month's meeting that the easing cycle is now at an end," said economists at Capital Economics in a report. "Inflation shouldn't be a major headache ... instead, the next move in rates is likely to hinge on what happens around October's presidential election."

[loganair] 19/5/2018 15:00

Surprising such a big drop in the share price of JPB of 6% when the Brazil Bovespa was only down 0.65% and so far this year is up 8.74%.

Investors are concerned about the future as the country will elect a new president in October, and many market-watchers are worried that the next leader could halt or reverse economic reforms begun by President Michel Temer. Markets have largely supported those reforms.


The Brazilian economy contracted by 0.13 percent in the first quarter of the year, according to the central bank's Index of Economic Activity.

The figures for 2018 so far show a worse development than predicted.

Due to worsening indicators, financial analysts in Brazil on Monday lowered their estimations for 2018 from 2.7 to 2.5 percent while the Brazilian government is maintaining its estimation of 3 percent GDP growth for 2018.



The Brazilian, Argentinian and Mexican currencies weakened and stocks across Latin America fell on Friday as a global emerging-market selloff drove many investors
to unwind bets on stronger currencies despite increased central bank intervention.

The real fell as much as 2 percent against the dollar to the weakest since March 2016.

The currency weakness came even after Brazil's central bank increased market intervention and unexpectedly refrained from cutting interest rates this week.

[loganair] 05/4/2018 13:19

The Brazilian economy could expand more than the central bank’s 2.6 percent forecast in 2018, central bank chief Ilan Goldfajn said on Tuesday, though the official estimate is “well-calibrated.”

Speaking in an event in São Paulo, Goldfajn said that the nation’s recovery from the deepest recession in decades still looks consistent despite recent volatility in economic activity readings.

[loganair] 24/3/2018 11:09

Great expectations by Marina Gerner:

So what is the outlook for the BRICS? Stammers says that, ultimately, China and India are looking to become leading global providers of goods and services, so they make things. In contrast, Russia and Brazil are expected to become the global giants in commodities, so they provide the basic raw materials needed to make those things.

Paul McNamara, an investment director and lead manager on emerging market bond, currency and hedge fund strategies at GAM, says: ‘China and India matter a lot; the other two are secondary.’ All the BRICS countries face different obstacles. ‘Russia is crippled by dysfunctional institutions and corruption, but Brazil is slightly better off,’ comments McNamara. Redwood says Russia has ‘suffered a setback from the lower oil price, which has hit its export earnings and tax revenues, and from Western actions, which have made some trade and transactions more difficult’.

Redwood observes that Brazil has been through a bad political and economic crisis, with recession, high inflation and difficult corruption problems forcing changes of government. He says: ‘There is now some hope of recovery, but there remain deep-seated economic and political problems to resolve fully.’ South Africa too has been suffering from political instability and failing economic policies. ‘Future sustained progress in both Brazil and South Africa will need stable reform-oriented governments that can shake off the problems of the past,’ he adds.

India has become the poster child for reform-led recovery in emerging markets, argues James Penny, senior investment manager at TAM Asset Management. ‘With the appointment of prime minster Modi, the country has been put on a path of steep and deep economic and government reform to bring its economy and vast middle-class population to the forefront in the modern market.’

‘India has scope to become one of the world’s largest economies, but it still has a lot further to go to increase incomes per head.’ Moreover, South Africa, Russia and to some extent Brazil rely on mining and the production of oil and commodities, whereas China and India are more dependent on imports of raw materials.

Dominant China:

However, Penny says the biggest and, on the global stage, the loudest of the BRICS nations remains China. The country continues to make headlines speculating about whether its economy could suffer a ‘hard landing’ in the face of its highly leveraged corporate sector and a fall in GDP to 6 per cent. But he is keen to put these figures in context: ‘Let’s be clear here,’ he says. ‘The US is struggling to find 4 per cent GDP growth, the UK is looking at 1.5 per cent, and the world is worrying about a Chinese slowdown to 6 per cent GDP growth?’

-China, not India, will dominate future Asian growth:

The growth rates of the BRICS economies, with the possible exception of India’s, over the next 10 years is likely to be about half that of the previous decade, according to Smith. India’s and China’s shares of global GDP growth will probably be smaller, but the countries will remain dominant.

‘China will remain the largest [BRICS] economy and should continue to command investors’ attention,’ he says. ‘But if India opens up and reforms, investors should begin to devote more of their attention to the subcontinent.’ That said, he points out that, given the relative size of the two economies today, it would still take more than 30 years for India’s GDP to exceed China’s, even if India achieves all its reform goals and China achieves few of its aims.

Ultimately, the strength of the BRICS as an investment proposition is their very diversity, argues Ballard. ‘They are so different that they provide an element of diversification beneficial for any long term investor.’

[loganair] 24/3/2018 11:00

Yields on Brazilian interest rate futures dropped on Thursday after the central bank
unexpectedly indicated it will continue cutting interest rates, while fears of a U.S. trade war with China helped put pressure on Latin American markets.

The bank on Wednesday reduced the benchmark Selic rate by 25 basis points to an all-time low of 6.50 percent.

But policymakers were explicit in forecasting another cut at their May meeting, contradicting the consensus that this week would mark the end of the deepest easing cycle in a decade. After that, unless conditions change radically, it would stand
pat, according to a policy statement.

"Unless the Brazilian real comes under pressure for domestic or external reasons, the central bank will be in no hurry to begin the tightening cycle," economists at Societe Generale wrote in a report.

[loganair] 15/3/2018 12:37

Western Asset Management favourite EM market is Brazil.

[loganair] 14/3/2018 20:39

Currently JAI is paying a little over 4% dividend, 1% per every three months.

[loganair] 14/3/2018 19:55

QP - If you would like to look at a general Asian trust ex-Japan there is JP Morgan Asian Investment Trust (JAI) which is also paying an increasing dividend on a quarterly basis.

I do not know whether my e-mails to JP Morgan's trusts have any influence, however for a couple years I pushed very hard for JAI to invest in Vietnam and guess what, they started to do so late 2015.


Another interview Mobius recently gave:

This summer he plans to launch a fund management firm called Mobius Capital Partners and plans to continue to invest in emerging and frontier markets and will help manage environmental, social and governance strategies.

As well as China, Mobius is bullish on Vietnam and Brazil.