Brazil, with room to continue surprising, says Credicorp Capital
Brazil's economic recovery accelerates alongside vaccination efforts, presenting solid investment opportunities across asset classes including Sovereign, Fixed Income, and Equities. The local market transformation has seen participation swell from 500,000 to 4 million since 2018, driven by lower interest rates and reduced investment barriers. Increased foreign interest and a surge in IPOs signal a favorable environment for equities. However, challenges exist for Brazilian sovereign and corporate bonds amidst rising volatility in the Andean region. Credicorp Ltd., the parent company, boasts a market cap of USD 20.12 billion.
- Brazil's vaccination program is progressing well, potentially boosting economic recovery.
- Local market participation increased from 500,000 to 4 million since 2018.
- Historical low interest rates are drawing local and foreign investments.
- Surge in IPOs, especially in growth sectors, enhances equity market appeal.
- Headwinds for Brazilian sovereign and corporate bonds amidst higher volatility in the Andean region.
With the pace of vaccination continuing to accelerate and an economic reopening taking shape, Brazil, Latin America's largest economy is growing presenting attractive investment opportunities in all asset classes: Sovereign, Fixed Income and Equities.
The local market is going through a major transformation, which has been going on since before the pandemic, but was certainly accelerated by it. In 2018 alone, the number of participants in the local market (Bovespa) was around 500,000 clients, and today (July 2021) that number has reached 4 million. This phenomenon is due to the lower interest rates, but more importantly, the reduction of barriers to invest directly in the market.
The investment world also includes many technology companies that have been listed on Nasdaq and therefore cannot be part of the local index, which represents an opportunity for active investment funds. Companies such as Stone, Pagseguro, XP, and Mercado Libre itself, which, although it is Argentinean in origin, has most of its business in Brazil, already exceed
Darío Valdizán, Director Head of Buy Side Research Fixed Income, Equities and Sovereigns at Credicorp Capital highlights:
The vaccination program continues to gain momentum and in line with government expectations, with a high potential daily vaccination rate.
Equities. Several factors combine to create a favorable environment for equities: a historical migration of local flows to the stock market, historically low interest rates, renewed interest from foreign investors, and a tsunami of IPOs focused mainly on growth sectors.
Fixed Income. Headwinds in macro and microeconomic determinants for Brazilian sovereign and corporate bonds, even more so in a context of higher volatility in the Andean region.
About us
Credicorp Capital is part of Credicorp Ltd., the leading financial holding company in Peru listed on the New York Stock Exchange (NYSE: BAP) and has a market capitalization of USD 20.12 billion*. Credicorp Capital is one of the subsidiaries of the holding Credicorp Ltd. Today, it has a presence in 5 countries and USD 37.8 billion ** of Assets Under Advisory/Management.
* Source: Credicorp / Information at the end of 2019, considering an exchange rate of USD 3.34
** Source: Credicorp Capital / Information at the end of 2020 (includes assets under custody managed by the Wealth Management team)
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FAQ
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