Bolsa do Brasil has the 3rd worst performance in the world and only beats Venezuela and Turkey

In a year marked by political uncertainties and an increase in the risk of uncontrolled public accounts in the country, the Brazilian Stock Exchange obtained the third worst result until November in a comparison carried out by the classification agency Austin Rating among 79 stock indexes from 77 countries – two from the United States (Dow Jones and Nasdaq) and two from China, considering the autonomous territory of Hong Kong.

The Ibovespa, the benchmark index for the Brazilian stock exchange, dropped 20.88% in the period, a devaluation that was only no greater than those registered by Venezuela, which sank 99.52%, and Turkey, which dropped 31.19% . The results consider the comparison in dollars, eliminating distortions caused by exchange rate fluctuations. In the comparison considering local currencies, the Brazilian performance was not worse than the Venezuelan one.

Of the 79 indexes evaluated, only 22 were in the red, which is consistent with a scenario of global liquidity provided by financial stimuli created by governments of different countries in order to combat the economic slowdown caused by the restriction of circulation measures imposed for the control of the Covid-19 pandemic.

The troubled political scenario, however, prevented the Brazilian stock market from taking advantage of this favorable context for risky investments, according to Austin Rating’s chief economist, Alex Agostini, author of the survey.

The performance of the Ibovespa was, for example, much lower than that obtained by indices from developing countries with characteristics similar to those of Brazil, such as China (-0.15%), South Africa (+7.87%), India (+18.06%) and Russia (+18.53%). It was also far from the American Dow Jones (+12.67%) and Nasdaq (+20.56%) indices.

Discussions about the partial postponement of payment of the Union’s judicial debts, called precatório, started in July and the evolution of this discussion to President Jair Bolsonaro’s decision to pierce the spending ceiling to increase the value of Brazil Aid to BRL 400 –the amount that the economic team pointed out as viable was R$300– are the factors that recently contributed the most to the poor performance of the Ibovespa.

From July to November, the Ibovespa dropped 19.6%. The drop is 28.6% considering the calculation in dollars.

“We are at a troubled time in politics because of the electoral race, we have an unresolved and even altered fiscal issue due to the government’s insistence on expanding Brazil Aid,” says Agostini.

The analyst points out that, despite the approval of the PEC of Precatório in the Senate this Thursday (2) has contributed to the dissolution of part of the uncertainties about the 2022 Budget, the process of discussion of the topic over the months negatively affected the investor expectations.

In addition, Agostini says that the decision to postpone court payments created a legal environment of mistrust that also affected businessmen.

After the political and fiscal crisis hampered the country from entering the wave of global liquidity, Brazil faces a more challenging world context with the advance of inflation inside and outside the country and a consequent monetary tightening.

“Naturally, the increase in inflation and interest rates makes people worried about money and they end up migrating to a safer fixed income investment”, he says.

Agostini highlights, however, that the Brazilian stock market started to grow significantly from the 2000s onwards, with the stabilization of inflation, and, therefore, it is less developed in relation to other markets.

He also highlights that some indexes that appear with extremely positive results in Austin’s ranking are irrelevant to the global market because they move low volumes of resources.

Considering these distortions, the expert emphasizes that the momentary result should not be the main parameter for evaluating the structured investment in the Stock Exchange, which should be designed for the medium and long term.

“People buy and must wait for the return ahead because it depends on the maturation of the companies’ investments, it is not overnight,” he says.

The combination of domestic risks and low economic growth, however, still place the Bolsa do Brasil in a situation of greater vulnerability to future global economic bumps.

“From 2011 to 2020, the average annual growth of the Brazilian GDP was less than 1% per year. This makes the Brazilian stock market suffer more in times of turmoil”, he concludes.