ADVFN Logo

We could not find any results for:
Make sure your spelling is correct or try broadening your search.

Trending Now

Toplists

It looks like you aren't logged in.
Click the button below to log in and view your recent history.

Hot Features

Registration Strip Icon for alerts Register for real-time alerts, custom portfolio, and market movers

JPB Jpmorgan Brazil Investment Trust Plc

66.50
0.00 (0.00%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Jpmorgan Brazil Investment Trust Plc LSE:JPB London Ordinary Share GB00B602HS43 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 66.50 - 0.00 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
0 0 N/A 0

Jpmorgan Brazil Investment Share Discussion Threads

Showing 51 to 71 of 425 messages
Chat Pages: Latest  5  4  3  2  1
DateSubjectAuthorDiscuss
14/7/2015
22:24
Forget about Greece because it doesn’t have the potential to hurt returns in a number of key markets.

That’s the message from Andreas Brock, who manages Coeli Asset Management, a Swedish fund manager that oversees more than $1 billion in assets.

As investors fret about Greece and its grim prospects even after striking a deal with creditors, Brock is instead spending the summer researching Brazil. Though the real has halved in value in the last four years and Brazil’s economy is expected to contract in 2015, banks and transport companies could be attractive once the worst is over, Brock said.

“I’m looking at what companies I want to own once we reach the bottom in Brazil,” he said. “I’m not saying we’re there yet, but we’ll probably reach the bottom some time between now and 24 months from now.”


As we are near the bottom is why in my good opinion it's a good time to invest in Brazil and JPB, that any money invested now will likely double by 2020.

loganair
19/6/2015
16:25
Brazil’s economy in April shrank for the sixth time in the past seven months, as the central bank continues to raise rates in Latin America’s largest economy.

The seasonally adjusted economic index, a proxy for gross domestic product, fell 0.84 percent in April from the prior month after dropping a revised 1.51 percent in March, the central bank said Friday in a report posted on its website. That was below all but one estimate from 33 economists surveyed by Bloomberg, whose median forecast was for a 0.40 percent drop.

Brazil is the only nation in the Group of 20 raising rates, as inflation is set to breach the upper range of the target for the first time since 2003. Monetary tightening and fiscal austerity measures are slowing the economy, which is expected to face the worst recession in 25 years.

The non-seasonally adjusted economic activity index fell 3.13 percent from a year ago, compared with a median estimate of a 2.5 percent drop, the central bank report said.

The central bank has increased the benchmark interest rate in the last six meetings by a total of 275 points. Policy makers said in the minutes of their June 2-3 meeting that the efforts to fight inflation are still insufficient and the bank will act with “determination and perseverance” to bring inflation to 4.5 percent by the end of 2016.

Even with the key rate rising, annual inflation has accelerated every month this year. Analysts surveyed by the central bank forecast it will close 2015 at 8.79 percent, exceeding the upper limit of the 2.5 percent to 6.5 percent target range for the first time since 2003.

Economists surveyed by the central bank see Brazil’s gross domestic product shrinking 1.35 percent this year before rebounding to 0.9 percent growth in 2016.

loganair
16/6/2015
11:20
If Brazil keeps going and continues to structurally reform then buying in now seems to me a good idea as one maybe buying in at the low point, maybe not at the bottom but near the bottom. Any investment now may bare wondrous fruit in 5 to 10 years.
loganair
16/6/2015
11:15
Brazil: what went wrong, and who can fix it? By Rachel Cunliffe:

“BRICs Hit a Wall”, declared the headline of Willliam Pesek’s Bloomberg View piece last Monday. The BRIC economies (Brazil, Russia, India and China), were meant to drive global growth as the West stagnated. It hasn’t quite worked out that way. Today, Russia is struggling under the combined forces of a sharp drop in oil prices (one of its key exports), EU sanctions due to the conflict with Ukraine, and corruption at every level of both the political and business landscape. China’s domestic demand is stagnating along with its exports, and it faces a difficult shift from manufacturing to a service-oriented economy. India is on the rise, with Modi on a mission to cut down corruption and bureaucracy, but its progress has been underwhelming, especially compared to the East Asian Tigers.

The most disappointing economy, however, has to be Brazil. Angel Ubide from Peterson Institute for International Economics wrote back in April:

“The list of its economic imbalances is endless: a rampant current account deficit in excess of 4 percent of GDP, an exchange rate that has long been overvalued but that has collapsed in just a few months, a public debt ratio to GDP in a rapid upward trend, a fiscal deficit of over 6 percent of GDP despite a high tax burden, an annual inflation rate of nearly 8 percent that has unanchored inflation expectations, an accelerated growth of wages well above their very low productivity.”

Even the Guardian is aware of just how bad things are in Brazil. The inflation rate currently stands 8.17%, and is predicted to rise further, while the country is headed for a deep recession. But Brazil shouldn’t be a lost cause. From the Bloomberg Quick Take:

“On paper, Brazil looks like a powerhouse. It’s the fifth-largest country in the world, by land mass and population. Its offshore oil reserves include the Western Hemisphere’s biggest discovery since 1976. It has the second-largest iron ore reserves, is the second-largest producer of soybeans and third-largest of corn. As much as 80 percent of its electricity comes from hydroelectric dams and it produces ethanol, meaning it has one of the world’s least carbon-intensive economies.”

How did things go so wrong for a country with so much potential, and such a wealth of natural resources?

It wasn’t an accident, but rather the result of a political strategy based on statism. María Elena Candia from Foreign Policy writes that “Starting in the 1950s, much of Brazil’s economic policy hinged on the policy mix known as developmentalism: protectionism, central planning, and the cultivation of the welfare state to encourage the growth of the internal market.” Half a century on, Presiden Dilma Rousseff’s policies have mostly been strikingly similar. Candia continues:

“The populist economic measures involved artificial reductions of interest rates, consumption stimulus at the expense of fiscal discipline, limits on the return rate for private investments in infrastructure, and the imposition of fixed prices for gasoline and electricity below costs.”

If any of this sounds similar to Venezuela, where price controls have led to critical shortages and the state-run energy company is floundering (Venezuela is the only country in the world to have a Minister for Electricity Shortages), it should. Both South American countries pursued populist policies which restricted private enterprise and gave excessive power the governments. Both have suffered crippling corruption, and seen the gift of their natural resources turn into a curse. While Venezuela is a much more severe case, Brazil does not seem to have learnt the lesson from its Northern neighbour.

Until now, that is. Recently, something surprising has been happening: Dilma Rousseff is turning back towards the markets. Her newly appointed pro-market finance minister Joaquim Levy (nicknamed “Minister Scissorhands”) has set Brazil on an austerity track, which included cutting public spending by $22.4 billion and increasing prices regulated by the government. He has promised in no uncertain terms to eliminate Brazil’s budget deficit. Meanwhile, the editors at The Economist write that:

“Financial watchdogs are equally impressed with Alexandre Tombini, the Central Bank’s governor, who has not allowed the threat of recession to deter him from fighting inflation, currently above 8%. On June 3rd the bank raised interest rates by half a percentage point, to 13.75%. Mr Tombini’s goal is to bring inflation down to 4.5%, the midpoint of the bank’s target range, by next year.”

Essentially, Brazil’s new plan seems to be to cut spending and devalue the currency to improve global competitiveness. This is a good start, but it isn’t enough. Brazil has serious structural problems which need to be addressed. These include “an enterprise-crushing tax system, inadequate infrastructure and antiquated labour laws”.

In short, over the last sixty years Brazil’s government got way too involved with the labour market and businesses, funding development programmes and welfare benefits it couldn’t afford, and crippling the ability of private firms to harness the potential of the country’s national resources. Cutting pensions won’t solve all of that. Rousseff seems to have finally come round to the idea that government control is not helping her country’s economy or its people. Let’s hope she keeps going.

loganair
09/6/2015
11:22
The economic data coming out of Brazil are dismal and it looks like it’s going to get a little worse before it gets better - 'only 'a little worse'...With the Brazilian stock market in the doldrums, it seems to me a good time to buy, before the economy starts to pick-up and stock prices start to rise rapidly.
loganair
09/6/2015
09:53
By John Whitefoot:

Brazil, Latin America’s largest economy, is in turmoil and teetering on disaster. Just five years ago, as the global economy was in the midst of one of the biggest economic disasters since the Great Depression, Brazil was one of the bright spots. Not anymore. Brazil’s economic outlook for the remainder of 2015 remains bleak. And the outlook for 2016 doesn’t look much better.

Brazil’s Economic Outlook Goes from Boom to Bubble to Bus:t

In just five years, Brazil has gone from being an emerging new-world economy to an economic catastrophe. In 2010, the country reported an enviable gross GDP growth of 7.6%. By 2011, it shrunk to 3.9%, falling further to 1.8% in 2012. Last year, Brazil’s GDP growth was 0.1%. And the most recent economic data point to Brazil entering its worst recession in 25 years.

What Happened?

In 2003, the Workers Party came to power. Thanks, in part, to a cash-transfer program called Bolsa Família (family stipend), 40 million Brazilians were lifted into the middle class, currently covering a quarter of Brazil’s population of 200 million. The government also made it easier for people to get credit to buy everything from cars to appliances.

But cheap money becomes expensive when the economy turns sour. And that’s just what happened. Brazil, in large part, relies heavily on exporting commodities like crops and natural resources. Over the last year, countries that buy Brazil’s commodities, notably China and Germany, have seen their economies grind down. As a result, the price of Brazil’s main exports—oil, white sugar, coffee, and soybeans—have tanked.

Brazil’s Imperfect Economic Storm:

Brazil has gone from a shining example of prosperity to desolation. And the Brazilian outlook for 2015 and 2016 looks bleak. With government debt increasing, the Brazilian real, the national currency, has lost a quarter of its value in 2015 alone.

In late May, it was announced that Brazil’s first quarter GDP fell 0.2% quarter-over-quarter; this marks a return to contraction after two consecutive quarters of growth. Personal consumption during the quarter went from 1.1% in the fourth quarter to a -1.5% contraction; the worst results since the fourth quarter of 2008. For 2015, Brazil’s GDP is expected to contract 1.2%.

On June 3, 2015, the Brazilian central bank raised its benchmark rate by an additional 50 basis points from 13.25% to 13.75%. Sitting at a six-year high, this is the fifth consecutive rate hike. And more are expected.

The aggressive rate hikes are designed to tame the country’s inflation, which currently stands at 8.2%, down to 4.5% by the end of 2016. The interest rate hikes may very well have the desired effect, but at a serious cost; sky-high interest rates make it expensive to borrow and kick-start an economy in the doldrums.

It’s one thing to complain about stagnant wages; but a drop is a whole different story. Higher inflation contributed to a 2.9% month-over-month decrease in real wages in April. That, coupled with higher borrowing costs, has left Brazilian consumer confidence levels hovering around record lows.

The Markit manufacturing Purchasing Managers’ Index (PMI) fell again in May to a reading of 45.9 from 46.0 in April; the lowest level since September 2011. The country’s PMI index remains below the 50-threshold that separates contraction from expansion.

Not surprisingly, Brazil’s business sentiment is deteriorating. In May, the Getulio Vargas Foundation business confidence indicator decreased a seasonally adjusted 1.6% over April’s reading to 71.6 points, the lowest level since the index began in October 2005. A reading below 100 signals that businesses are more pessimistic than optimistic. Brazilian businesses are extremely pessimistic.

The economic data coming out of Brazil are dismal and it looks like it’s going to get a little worse before it gets better. At least the country has some shiny new World Cup venues.

loganair
29/5/2015
19:42
Brazil Economy Hitting The Trough:

Brazil’s economy is bottoming out and may have hit its trough. The biggest concern, besides the current lackluster GDP numbers out of the country today, is inflation. So long as inflation remains parked above 8%, the Central Bank of Brazil will be forced to raise interest rates regardless of the economy.

For risk tolerant investors looking to go someplace different, yet exciting, and not led by Vladimir Putin (Market Vectors Russia ETF up 30.3% YTD), then have we got a place for you.

Even doing poorly, Brazil has managed to beat consensus. First quarter GDP came in better than expected. It declined 0.2%, but that’s better than market forecasts of 0.5%. Growth was helped by a meaningful inventories build up. Without inventories however, first quarter GDP would have contracted 1% on a quarterly basis. In addition to that, there was positive net export growth of 5.7% and import growth of 1.2%.

“This GDP report might even be mildly positive, or at least not terribly negative,” says Bill Adams, senior international economist at PNC Financial in Pittsburgh. “The recession might not be at a bottom yet, but the first quarter’s contraction was a bit less severe than feared, and the trade balance is improving.”

The bad news comes from domestic demand, which contracted 1.4% quarterly. With unemployment rising and a general climate of disgust in Brazil regarding political leadership, Brazilians are not spending as much as they’re accustomed to. Household spending fell 1.5% from the fourth quarter, seasonally adjusted. The government is also spending less, which is no surprise. Government expenditures declined 1.3% in the first quarter compared to the fourth.

Bruno Rovai, a Brazil analyst for Barclays in New York, said weak domestic demand was in line with his expectation that the recession will be led by household consumption, reflecting lower disposable income, rather than a drop in fixed assets investments. “The outlook for growth in Brazil remains quite bleak. The (Central Bank) strategy for monetary policy will hurt growth conditions even further,” he said. The bank is hell bent on lowering inflation at all costs.

BarCap forecasts second quarter GDP to decline 0.7% with risks to the downside.

The Economist Intelligence Unit revised Brazil’s GDP growth forecast for 2015 to come in at -1.5%. The EIU was a little below consensus in their 1Q target of 0.6%. For Brazil hopefuls out there, maybe they’ll be wrong again on 2015 GDP.

Brazil has been in this boat before: low growth, high interest rates, high inflation. The central bank stated that its goal was to get inflation to target of around 5.5% by next year. Then investors will see interest rates decline, helping propel Brazilian asset valuations higher.

loganair
20/5/2015
16:15
Brazil Will Get Worse Before It Improves by Ashish Advani:

Last week I was in Rio de Janeiro. This country always fascinates me for the stark disparity on display between those who have a lot versus many of the citizens who don't have much. It is a city of contrasts.

Brazil started the century with tremendous promise and potential. It could do almost nothing wrong for the first six to seven years of the millennium. As a second source of agricultural and natural resource supplier to China, it grew in leaps and bounds. The wealth effect and aura of success brought it the 2016 Olympic Games as well as World Cup soccer. Right when Brazil was invincible, the bottom fell out, as the world slid into the 2008 recession.

China slowed down and Brazil got hit particularly hard. Matters were made worse when the incoming president was a populist and imposed regulations on businesses, which established significantly higher burdens of compliance as well as new taxes.

I kid you not, most businesses have between 25 to 35 taxes to pay each month. Just to monitor and stay in compliance, every company has to have a whole tax department just to stay open.

Fast forward to now, the Brazilian real has declined to as low as BRL3.25 before backing up to BRL3.00 (remember Brazil real is quoted European style so works opposite to logical direction).

But I do not believe we are over the worst for Brazil. The president was re-elected last year again and may not have learned all her lessons yet. The country does have a good finance minister now, but it is a tremendous battle uphill for him.

Deep-seated inflation has taken hold and is very stubborn in its staying power. The finance minister has a real challenge to be able to control inflation by raising interest rates but also allow businesses to flourish where he would have to reduce interest rates. He is caught between a rock and a hard place.

The good news is that he is fully aware of the difficult task ahead and is capable of facing the challenge. The bad part is that politics may not allow him free will to really cure the country of its ills.

I believe that the economy will decline into a small recession and the Brazilian real will decline by about 10 to 15 percent further in the next 18 months before things start improving.

loganair
13/5/2015
09:22
Brazilian stocks tumbled amid concern valuations they’re overvalued as analysts cut profit forecasts more than in any major market in the Americas. Earnings-per-share estimates for companies in the benchmark were cut by 6.4 percent in the past four weeks.
loganair
01/5/2015
14:12
Brazil’s Turnaround Elusive as Tightening to Come Belies Rally by Andre Soliani Costa:

April was kind to Brazil’s investors as the stock exchange entered a bull market and the currency rallied. Ordinary citizens didn’t fare so well: Unemployment rose to the highest in three years and interest rates surged to a six-year peak.

Signs that the economy is entering a recession and that policy makers will continue to tighten credit indicate that the road to recovery will be long, even as investors show renewed appetite for the country’s assets.

President Dilma Rousseff’s administration has pledged to do what it takes to narrow the budget gap, bring inflation to target and create conditions for state-run oil company Petrobras to return to bond markets. Keeping those promises may be hard, with Rousseff’s popularity at a record low, lawmakers balking at her economic policies and the economy headed for its worst contraction in 25 years.

“Brazil stepped back from the brink of collapse, but that doesn’t mean that it’s poised to rally,” Klaus Spielkamp, head of fixed income at Latin America-focused securities brokerage, asset management and investment banking firm Bulltick LLC, said by telephone from Miami. “The environment is still tough.”

The Sao Paulo stock index entered a bull market on April 24 after climbing 21 percent since its Jan. 30 low, with steelmakers Usinas Siderurgicas de Minas Gerais SA and Cia. Siderurgica Nacional SA among those leading the rally. The real rose 6 percent in April, the biggest increase among the 16 most-traded currencies tracked by Bloomberg after the Norwegian krone.

Investors Flocked:

Rising commodity prices and expectations that the U.S. Federal Reserve will delay interest-rate increases fueled the gain in assets. Foreign investors also flocked to Brazil after its state oil company, known formally as Petroleo Brasileiro SA, reported its first audited results since August and Rousseff picked the party chief of her biggest coalition partner to lead negotiations with Congress.

Investors may leave as quickly as they came, said Bernd Berg from Societe Generale in London. Interest rates in the U.S. eventually will rise and Brazil’s government may fail to shrink the budget fast enough to appease credit-rating companies. The threat of a downgrade increased last month when Fitch Ratings cut Brazil’s credit-rating outlook to negative, citing challenges in filling government coffers amid a stalled economy.

‘Rapidly Exit’

“These investors rapidly exit Brazil assets again on the first signs of trouble,” said Berg, director of emerging-markets strategy at the French bank. “Growth and inflation data must improve significantly to attract longer-term capital inflows.”

Traders aren’t optimistic that central bank President Alexandre Tombini will succeed in bringing consumer-price increases to the 4.5 percent target. Even after policy makers raised interest rates on April 29 for the fifth consecutive meeting, the bond market’s outlook is for a 6.19 percent jump in the cost of living in a year.

The central bank signaled in its latest decision it will lift benchmark borrowing costs for a sixth time in June after inflation in mid-April surged to more than a 10-year high.

With interest rates stoking credit-card bills and prices on things from electricity to clothing surging, consumption has faltered. Auto production in March fell 7 percent from a year earlier, contributing to a 50 percent decline in MAN SE’s first-quarter earnings as the German truck manufacturer said South American orders dropped.

Worst Performance:

Such dynamics have led analysts surveyed by the central bank to forecast a 1.1 percent drop in gross domestic product this year, which would be the worst performance since 1990.

The presidential press office didn’t respond to an e-mail sent after business hours seeking comment on Brazil’s economic outlook.

The slowdown is eroding tax revenue at a time when Finance Minister Joaquim Levy says he needs to narrow a budget deficit that threatens Brazil’s investment-grade status. The deficit expanded to 7.8 percent of GDP in the 12 months through March.

Levy cautioned lawmakers on April 29 that the risk of a downgrade will “return fast” if Brazil fails to implement measures to contain spending and raise revenue.

Senate President Renan Calheiros a day later said the government is forcing workers to pay the price for Levy’s austerity policies, which include legislation to cut unemployment and pension benefits.

Venting Discontent:

“This can’t even be called a fiscal adjustment,” Calheiros, a member of Rousseff’s alliance in Congress, told reporters in Brasilia. “The fiscal adjustment needs to cut the fat, reduce the number of ministries and political appointments. Without that, it’s an adjustment for workers.”

More than two million Brazilians in March took to the streets to vent discontent over the deepening economic malaise and government graft. In the country’s largest-ever corruption scandal, federal police are investigating allegations that a cartel of construction companies fixed bids on Petrobras contracts and bribed executives during a span stretching back to when Rousseff was the oil company’s chairman.

The president’s popularity is at a record-low 13 percent as the majority of Brazilians support impeachment proceedings against her, according to an April 9-10 poll by public-opinion research company Datafolha.

With Rousseff’s own political survival in doubt, it won’t be easy to rally support in Congress and on the streets for unpopular measures that investors say are needed to put the economy back on track, said Christopher Garman, head of country analysis at political-risk consulting firm Eurasia Group.

“The president isn’t out of the woods just yet,” Garman said in a phone interview from Washington. “It’s still a precarious environment. It would be a mistake to look at recent developments as a true sign that the administration is on firmer footing.”

loganair
17/4/2015
09:32
Brazil's stock market the Bovespa is up about 13 percent over the last month and
on Wednesday nearly crossed the 55,000 point threshold, a level it has not breached since late last year.

Many investors have been encouraged by low prices following a sell-off earlier in the year, as well as by perceptions that political infighting over Brazil's fiscal adjustment efforts had diminished.

loganair
14/4/2015
09:10
Brazil's economy faces a perfect storm of problems by Henry H. McVey:

My travels took my KKR colleague Jaime Villa and myself from New York to Brazil, where we participated in a number of meetings, including discussions with business leaders, macroeconomic analysts and government watchers. As colleagues at our São Paulo office can attest, there is a lot going on in Brazil right now on the macro front.

We believe Brazil’s economy is caught in somewhat of a perfect storm, including pressures from the Petrobras corruption scandal, an epic drought (70 percent of energy in Brazil is hydroelectric) and a major fiscal adjustment since Joaquim Levy, the country’s new finance minister, took office at the start of the year.

We have lowered our 2015 GDP growth forecast to –1.5 percent, versus our prior estimate of –0.75 percent and a consensus projection of –0.65 percent. Credit conditions are tightening amid higher rates, and confidence, among both businesses and individual consumers, remains under pressure.

Consistent with this choppy macro outlook, we estimate that the country’s total risk premium has dramatically increased, to 10.4 percent from 6.5 percent in 2012. As such, Brazil now joins countries such as Nigeria and Russia at the high end of the perceived risk premium — and it is nearing Argentina.

We feel compelled to raise our inflation forecast for 2015 to 7.3 percent, compared with our previous estimate of 6.5 percent and versus a consensus of 7.6 percent. We thought previously that the adjustment in regulated prices and subsidies would be gradual and that Brazil would not allow inflation to break the 6.5 percent upper band of the inflation target for a sustained period. We no longer think this is the case.

Despite significant nominal depreciation, Brazil’s real effective exchange rate still needs to come down if the economy is going to rebalance toward exports and investment, versus the prior cycle of government-induced consumption.

The last time we saw macro sentiment this bad in an emerging-markets economy was in India before the prime minister and the head central banker were replaced. We do not see President Dilma Rousseff being impeached, but we do think that Levy could emerge as the most influential figure in Brazil’s potential economic recovery story.

We believe an upside case for 2016 and beyond can emerge under three conditions. First, Rousseff continues to support Levy and allows him to enact fiscal austerity without intervention. Second, as a result of tighter monetary and fiscal policy, inflation slips back toward more manageable levels. Third, CEOs get their confidence back and spend, particularly on much-needed investment.

Against the current macro backdrop, one has to be selective on the investment front, including on the private equity side. We left São Paulo thinking there are interesting opportunities for investors to consider. For example, after the most recent central bank increase of its overnight rate to 12.75 percent in early March, short-dated bonds offering real yields of 5.5 percent now appear quite attractive, compared with investment opportunities elsewhere in the world.

In addition, we also heard a lot about distressed sales of subsidiaries and receivables from companies either being swept up in the events surrounding the Petrobras investigation or overleveraged to spending that has not occurred. On the other hand, certain services companies could face additional tax hikes, whereas many companies that benefited from excessive credit and government outlays to middle-class consumers are likely to face stiff headwinds from tighter credit and a deteriorating labour market.

Finally, we believe that companies that can drive growth through expense control, consolidation and export sales should be rerated upward. Some 30 percent of the companies listed on the BM&F Bovespa actually appreciated by 20 percent or more in 2014.

Overall, from an asset allocation perspective, Brazil reflects the emerging-markets carnage we now see more broadly following the plateauing of China’s growth binge. The key for Brazil will be to refocus toward investment and savings and away from leveraged consumption. This transition will not be easy, but considering how risk premiums are up and valuations are down, now is probably not a bad time to be sniffing around, particularly for investors who can invest higher up in the capital structure — and still get some equity upside.

loganair
24/3/2015
17:14
"The Brazilian economy is slowing, GDP forecasts having been progressively cut, inflation is rising at a time when it is subdued across the globe, and unemployment is also on the rise," he says. "The political picture isn't great either."

He argues that the direction of policy under Dilma Rousseff, Brazil's president, has become increasingly market-unfriendly, while the government is also facing resistance to its well-publicised austerity plans.

"Like a number of other emerging market economies, it is quite exposed to commodity prices and commodity demand across the globe is fragile, as China slows," he adds. "With the US having ended QE and the dollar strengthening, that's also pushing the cost of capital up for emerging markets that have borrowed heavily in dollars."

There are certainly reasons to be concerned about Latin America, not least of which is its high dependency on commodities and natural resources, according to Patrick Connolly, a financial planner at Chase de Vere.

Other potentially negative factors include inferior corporate governance and greater political risks, the latter having been evidenced by a number of elections in recent years, which has resulted in little certainty about the direction of economic policy.

"While stock prices are arguably at attractive levels, there doesn't yet appear to be any real catalyst to improve performance with commodities prices still low, economic growth still sluggish in many countries and some doubts about the prospects for China," adds Connolly.

There are certainly major drawbacks as far as Brazil and Latin America in general is concerned but is doesn't automatically mean that funds investing in this region should be ignored. In fact, industry observers also expect countries in the region to develop strongly over the next decade.

It's a point acknowledged by Mark Dampier, head of research at Hargreaves Lansdown, who highlights a young, enthusiastic workforce, better education, improving infrastructure and a rich variety of resources as factors contributing to economic growth.

Political instability, corruption, and inflation are all risks, he concedes, but they are in many emerging economies so these have to be put in context. Whether they are suitable for individual investors, he points out, depends on their circumstances.

"A long-term investment horizon is certainly essential, and funds investing in this region tend to appeal to adventurous investors with well-diversified portfolios," he adds.

Those who want to get exposure have a choice. While Latin America doesn't have its own sector in the eyes of the Investment Association, the relatively small number of funds dedicated to this region can be found within Specialist.

The first option is to buy into one of these funds. This will give you more of the upside should Brazil and Latin America in general perform well over the coming years, although you’ll need to examine the investment goals and approach of the manager at the helm before you buy.

However, given the more volatile nature of such investments, it may be prudent for everyone - bar those with a high tolerance to risk - to consider a broader emerging markets fund that will embrace Brazil and Latin America as well as other regions.

loganair
17/2/2015
11:02
Brazil’s water shortage is a big bad buying signal By: James McKeigue:

Let me put this as clearly as I can: Brazil is in crisis.

Brazil’s industrial heartland, the state of Sao Paolo, is in the grip of a fierce drought. The 20 million inhabitants of the country’s biggest city are now facing water rationing, as are its largest firms. Around three-quarters of Brazil’s electricity comes from hydroelectric sources, so power shortages are likely.

As if that wasn’t bad enough Brazil’s political and business elite is being torn asunder by the ongoing Petrobras scandal. Allegations of corruption within Brazil’s state oil company have now spread from the country’s largest corporations to its main political parties. Just months after her election victory, President Dilma Rousseff is facing calls to be impeached.

All of this comes as Brazil’s economy continues its downward slide to recession. The heady days of 7.5% GDP growth in 2010 must seem a lifetime away for Rousseff now. Last year GDP grew by just 0.1%, and most analysts reckon 2015 will see a recession.

Regular readers won’t be too surprised by all of this. Ever since I started covering Latin America for MoneyWeek back in 2012, I have warned readers to stay away from Brazil. Steering clear of the region’s biggest economy hasn’t been easy, but it’s paid off. The Bovespa (Brazilian stockmarket) is down by 20% since its 2012 highs.

Brazil’s had structural problems for decades, and been overpriced for years. Now that’s only half-true. The country still has serious problems, but now it’s cheap as chips.

You might think Brazil looks like an awful investment opportunity, and until recently I would have agreed with you. Now, though, the negativity around Brazil has reached such fever pitch that the contrarian in me is itching to invest. Let’s look at the problems that have got investors running scared.

Short-term greed screwed Brazil into the ground:

Let’s start with the drought, which has the potential to be the most serious of all the problems. Brazil has gone through a dry patch, with the famous rainy season failing to live up to its name for several years on the trot. But this isn’t just about a lack of rain – there are more deep-rooted structural causes.

Lots of scientists believe deforestation is to blame. Over the years, Brazil has hacked down incredible amounts of its forests, for logging and farming. Regardless of whether you believe in global climate change or not, it seems quite plausible that such huge changes would have an effect on a local scale.

Economic growth has also had an impact. In the 20th century, Sao Paolo became the most densely-populated and industrialised part of Latin America. That’s pushed up demand for drinking water, while also reducing its supply thanks to contamination and industrial use.

But what’s really frustrating for Sao Paolistas is that despite all of the above, the water shortages could have been avoided. After all, we’re not talking about the Gobi Desert here – Brazil has the world’s biggest supply of freshwater. But Sao Paolo’s water has been terribly mismanaged. Around 30% of drinking water is lost through leaks in the system, while only 30% of wastewater is treated. That untreated water goes on to contaminate local rivers, reducing the supply of clean water. Experts have been warning about looming water shortages for years, yet no politician has wanted to make the tough decisions to deal with the problem.

At the moment the impact is quite cosmetic – restaurants, for example, are serving meals on paper plates to avoid washing up – but when industrial users face water shortages then the economy will suffer. If the drought continues, Brazil’s hydro plants will suffer, and power supplies will stutter.

But I’d back Brazil to improve its water management. Technically, it’s not impossible, it’s just that until now the issue has been that no-one thought it politically worthwhile to solve the problem. Now fixing the water will become Sao Paolo’s number one vote issue. If water management improves, businesses will be more secure.

Corruption has destroyed Brazil’s pride and joy:

Brazil has also been stung by corruption, which I covered in great detail in December.. Essentially, when Brazil found lots of offshore oil, Petrobras embarked on one of the world’s biggest corporate investment programmes. With oil heading towards a record high of $148 a barrel, the company ambitiously planned to build a fleet of ships, rigs and refineries to ensure that the country made the most of the bonanza. Unfortunately, the oil has proved difficult to extract and the production schedule has gone awry.

Even worse, it’s now emerged that Petrobras officials were deliberately overpaying for goods and services to earn kickbacks from contractors. These bribes were shared among greedy politicians to ensure government support. We still don’t know how much exactly but the conservative estimates are talking about billions of pounds’ worth of kickbacks.

Brazilians are used to corruption but this one has hit them hard. Petrobras has a place in Brazilian society that is hard to imagine any British firm having here. It was an immense source of national wealth and pride. Unsurprisingly, the majority of Brazilians think that Rousseff, who was Petrobras Chairman while all this was going on, must have known about it. With her approval ratings standing at all-time lows, some political opponents have started to call for her impeachment. Analysts reckon that she will probably survive, but the battle to find scapegoats and the huge numbers of likely culprits mean that the business and political atmosphere will be toxic.

All of the above means that the politicians and businesspeople will have less attention to give Brazil’s economic woes.

There’s no doubt that the corruption scandal is bad, even by Brazil’s standards. But in many ways the economic damage has already been done: now it’s a case of cleaning up. The political fallout will continue a little, then be resolved one way or another. Now could be the perfect time to invest, while markets are glum but before a recovery sets in.

Opportunity amid the gloom:

Yes, the short-term position is dire but I’m a medium- to long-term investor and over that time frame Brazil looks alright.

I’m certainly not bullish over the Brazilian economy. Analysts expect a recession this year and I think it will take Brazil a long time to sort out its structural issues. Brazil may not grow as well as it should, I think it will still reward investors: it’s just so cheap right now.

Brazil’s market is now down 30% from its 2008 peak, trading on a forward price/earnings ratio of 11.3 (this means the price of one share in the index divided by the index’s projected earnings per share for 2015 – a measure of how expensive the index is relative to the amount of money its companies are making).

The local currency, the real, has also taken a battering. It’s at a ten-year low against the pound. So if, as a sterling investor, you buy a Brazilian stock, you also stand to gain if the real strengthens.

There’s lots of ways you could play this. My personal favourite would be through a tracker of Brazil’s main stock index, the Bovespa. The reason that I’d go for an ETF instead of an actively managed fund is that this story could get worse before it gets better; you might be holding the position for a few years. If so, you want your annual management charges to be as low as possible. One option is the iShares MSCI Brazil UCITS ETF (LSE:IBZL).

If you insist on going down the actively managed route – and I am not recommending this – then check out BlackRock’s Latin American Investment Trust (BRLA). I’ve met the manager Will Landers a few times and he definitely knows his stuff. The annual charges are higher, of course, but the trust is trading on a discount to net asset value of 9%. If sentiment towards Brazil changes you will get an extra boost.

(JPB is currently trading on a discount to net asset value of 8%)

Changing a long-held investment position like this isn’t easy. I won’t be able to use every bad story coming out of Brazil as an excuse to tell you ‘I told you so’, but when Brazil is this cheap, it’s time to get off the sidelines.

loganair
14/2/2015
13:42
By Raphael Kass of Mirage Capital who advises on emerging market investment:

After the dust has settled: EM insider on Brazil’s next steps:


Brazilian soap operas are famous for their creative plots, unpredictability and emotional volatility. Presidential elections in the country follow suit.

Before the first round, it seemed Marina Silva, a previously unlikely contender, would dethrone Dilma Rousseff, who had been placed in power by Lula four years earlier.

Silva’s role was upgraded from vice presidential candidate when her running mate died in a plane crash. However, instead of Silva, Aécio Neves came out ahead in the polls and was set to face Dilma in the run-off on 26 October.

In the period between rounds, Neves showed his managerial and intellectual superiority over Rousseff and the polls reflected that.

He was able to highlight the various shortcomings of the current administration, at times leaving his opponent gagging or changing the topic of conversation to avoid accepting her party’s inadequacies.

Neves offered to challenge the current politics of corruption – the very issue that was protested so vociferously by the country-wide demonstrations after the World Cup tournament.

As a result, Aecio’s advantage was forecast at levels near 10% over the current president a few days before the vote. Surprisingly, he ended up 3.5% behind her on election day and Rousseff was re-elected. What happened?

Unravelling the riddle:

To answer that question, it is important to understand regional socioeconomic differences within Brazil. In short, the southern regions are the tax-paying, educated engines of economic activity, while the northeast is poor and a net recipient of government subsidies.

In order to gather more votes and stay in power, The Worker’s Party focused its years in office on building a large voter base in the northeast by means of providing housing, baby, and all other types of subsidies one could think of.

The result was that instead of building an educated, hard-working and socially-aware population there, the government fostered a culture of quick reproduction and benefit earning. But how does such an electorate explain the vote swing? One week before the second- round voting, millions of text messages and emails were ‘inexplicably’ sent to benefit recipients, alleging Neves would end all benefits if elected.

The U-turn in voter intention polls was immediate and tremendous, even after Neve’s denials on TV and an agreement with the Worker’s Party to stop the rumours, which was not kept. The damage was done and it can only have been further worsened by alleged vote buying all over the northeast.

Back to square one?

Watching Rousseff’s acceptance speech, it seemed clear that her re-election was no news to her. She then claimed to seek a coalition government and to make efforts to change the country’s political short-comings.

Indeed, she did that. The very next day, the government had a vote seeking to create ‘people’s law-creation groups’, a clear effort to by-pass Congress and the Senate in law-making! Congress was quick to deny her that move into Venezuelan-style government but the dye was cast.

The political mood in the country changed. Street demonstrations were quickly staged in Sao Paulo and other capitals and the polarisation between North and South has begun. Where will it lead?

Much will depend on the government’s next moves. As it stands, Rousseff’s reaction to the well-written piece in The Economist is that the publication is ‘allied’ to financial interest groups abroad who want to usurp Brazil’s wealth. She also claims some in the local press are out to get her. If she does not replace her finance minister soon, who is adept at making onsensical statements himself, he will likely wreck the economy even further. He is alleged to be on his way out by the year’s end but who wants to take the job under current conditions? Would any proper finance guru want to?

The country’s inefficient tax code continues to stifle entrepreneurs and raise costs at all levels, while a protectionist umbrella leaves the domestic industry well-protected from cheaper and better foreign-made products.

Infrastructure is poor, which can only be explained by a lack of tax pass-through resulting from corruption at all government levels.

Fiscal ratios continue to deteriorate, pointing to a likely near-zero primary balance by the year’s end, versus a target above 1.4%. Inflation is persistently above government targets and likely under-reported, forcing the non-independent Central Bank to continue to raise rates and thus increase the government’s borrowing costs in a recessionary economy.

And to top it all, 40% of adults are highly indebted and in default, while the country suffers from water shortages that were unseen before. The choice of finance minister is crucial and must be made well, sooner rather than later.

Fasten your seatbelts:

The current economic challenge demands an orthodox financial management programme, which will shake the Worker’s Party’s electoral foundations. It will require Rousseff to acquiesce to The Economist’s recipes rather than pursue her plan to slowly but surely transform the Brazilian political system into one similar to Venezuela’s.

It will require an honest approach to witch-hunting within the government in the corruption scandal involving Petrobras, other government companies and many of Rousseff’s allies. The alternative may involve a series of ratings agency demotions to sub-investment grade, worsening economic conditions and even an eventual military re-ordering of power.

While Brazilians are a people not yet ready for democracy, maybe the government who claims to be for all Brazilians is and will make the right choice.

Investors of the world, be braced for volatility!

loganair
14/2/2015
13:31
By Chris Sloley on 09 February 2015 - Brazil set for difficult growth in 2015, says LatAm equity head:

Brazil is heading for one of its toughest years for growth in a ‘long time’ according to Santander Asset Management’s head of Latin America equities José Cuervo.

The Citywire manager said the country will struggle with the fallout of on-going corruption scandals and post-election promises.

Speaking to Citywire Global, Cuervo, who runs two Latin America focused equity funds, said global markets are over-estimating the amount the Brazilian economy will slow down but that short-term problems will have a powerful effect on its growth level.

‘There is going to be a period of difficulty and, before we can see any pick-up, we think 2015, in growth terms, is going to be a horrible year. It is going to be one of the worst for a long time because of the problems it has been having political.’

‘Brazil is not going to grow at 5% per year for the foreseeable future but we think it can grow at two or maybe three percent, which is quite a bit more than the market is expecting. The market is thinking slow growth means no growth and is pricing in zero growth for the next three or four years.’

The announcement of senior staff being removed at semi-public energy giant Petrobras due to corruption concerns has compounded the country’s problems which have been fuelled by a slump in commodity prices, with some market experts believing it could pull Brazil back into recession.

‘I think there are some long-term structural problems to deal with. What Brazil has been doing is building off expectations that the country’s elections would lead to a certain amount of investment clarity and improved policy-making,’; he said.

The long game:

Despite these issues, Cuervo currently has a 52% exposure to Brazil in his Santander AM Latin American Equity Opportunities and is looking at its long-term potential.

The near-term picture looks difficult but Cuervo said his team is projecting 2016 to be more promising and echo fellow Latin American growth story Mexico, which is going through energy sector reforms, in generating longer-term growth.

‘Once we get past this problematic period, we think the market will begin to think 2015 was a year of adaption and 2016 is a year when we start to see the economics and earnings delta feed into market, he said.

‘This will see a premium attached to Brazil in terms of valuation much in the same way Mexico is experiencing one now as it goes through reforms.’

loganair
14/2/2015
13:28
“There is going to be a period of difficulty and, before we can see any pick-up, we think 2015, in growth terms, is going to be a horrible year. It is going to be one of the worst for a long time because of the problems it has been having political,” said Jose Cuervo, Santander Asset Management’s head of Latin America equities, in an interview with Citywire Global.
loganair
14/2/2015
13:25
Stronger Outlook By Latter Half Of Decade:

Metals consumption and production will face headwinds into 2015 on account of modest economic growth. We forecast real GDP growth of just 1.0% in 2015 on the back of sluggish private consumption, subdued fixed asset investment, and a weak business environment. Moreover, electricity costs remain elevated, raising costs for the energy-intensive metals industry. Nevertheless, our multi-year outlook towards Brazilian economic growth, as well as key sectors, is more constructive. The automotive, construction, and infrastructure sectors will see expansion in the years ahead, driving metals demand and hence production, by the latter half of the decade.

loganair
10/1/2015
14:12
The oil crash will define 2015:

For Colombia, Mexico and Brazil the short-term impact is negative, but manageable. For starters all three have much stronger, more diverse and better managed economies than Venezuela.

Colombia has some of the region’s cheapest oil, which means it can still make a profit at these prices. Meanwhile, Mexico and Brazil have the silver lining of strong manufacturing industries that will benefit from cheaper inputs.

loganair
10/1/2015
14:08
Time to buy Brazil? By: James McKeigue

This time last year I remained sceptical, explaining that “I’m not convinced of a Brazil turnaround just yet”. And Brazil’s main index, the Bovespa, hasn’t made me regret my decision, as it’s down on last year. Brazil’s currency, the real, has also taken a pasting, increasing losses for investors that hadn’t hedged their positions.

Many investors blame the president, Dilma Rousseff, who won another mandate in October. During her first term, Rousseff presided over an economic nightmare that saw growth go from 7.5% in 2010 to practically flat in 2014.

Of course, it wasn’t all her fault. External factors such as slowing commodity prices didn’t help, and tighter credit sapped domestic demand. But investors did blame Rousseff for an interventionist economic policy that saw the state heavily involved in key sectors of the economy. And investors were dismayed by the ‘creative accounting’ that saw Brazil stick to its fiscal targets in name more than spirit.

But since Rousseff won her second election in October, early signs have been positive. Her first move was to appoint former Bradesco Asset Management CEO, Joaquim Levy, as finance minister. The former investment banker immediately pledged to improve the country’s struggling public finances.

The plan is for a 1.2% primary surplus in 2015, followed by a 2% surplus in 2016, which is expected to be maintained in subsequent years. Another key appointment was Nelson Barbosa, a respected economist, as planning minister. He will be in charge of directing Brazil’s huge infrastructure programme – an important job given Brazil’s notorious infrastructure problems.

So is this enough to convince me to change my mind? Well I’m not too sure about the politics. For example Barbosa’s first announcement – a plan to revise the calculation of the minimum wage – was hastily retracted one day later. Local press reports claimed that unions had persuaded Rousseff to overrule her minister… not an encouraging start.

However the slide in the stock market coupled with the fall in the currency can’t be ignored forever. My resolution for this year will be to look for ridiculously cheap Brazilian stocks, especially if they’re in industries, such as manufacturing, that should benefit from the weak real. I’ll let you know how I get on.

loganair
24/12/2014
22:58
By David Kempton on Dec 23, 2014

Brazil and India look good:

Of the developing world you should go into 2015 with some India or Brazil exposure. India I know only as a tourist but I worked in Brazil as an engineer for a while. All those years ago I was struck by their diversity and youthful exuberant ambition, and current statistics indicate the trend continues. This vast country has everything and one day, with a good government they’ll take on the world and your children will bless you for taking a stake, now very cheap, with the currency and economy on their knees.

In India prime minister Narendra Modi seems highly effective and even more popular. The market and currency have been very strong this year, but it is still worth buying India, currently in a sweet spot and ticking most of the boxes.

loganair
Chat Pages: Latest  5  4  3  2  1

Your Recent History

Delayed Upgrade Clock