Foreigners buy one-off shares on B3 and recommend caution with Brazil in 2022

The restrictions imposed by the ômicron variant and the expected increase in interest rates in the United States, added to the uncertainties about economic policy in Brazil in the midst of the electoral dispute, have caused investors to continue to get rid of shares on the Stock Exchange in the beginning of this year. year.

In 2022, until January 10, the Ibovespa, the main stock index, has already accumulated a drop of approximately 3%, after accumulating losses of almost 12% last year.

However, attention is drawn to the fact that the movement has greater participation of Brazilians. While the local retail investor has preferred to sell their shares in the face of the challenging scenario that lies ahead, some foreigners have opted for a more patient stance — even on account of the exchange rate level, favorable to this group.

B3 data indicate that this year, until January 6, foreigners invested around R$2.6 billion in shares in B3, after having already ended 2021 with a net balance of around R$70.7 billion, without considering the initial public offerings (IPO) and subsequent (follow-on) shares.

With the movement, the participation of foreigners in the local market rose from around 50.2% in December to 52.5% on Thursday (6). The share of individuals went from 18.6% to 15.7% in the same range.

Part of Brazilians would be migrating mainly to fixed income, considered safer in the scenario of local instability, and of increasing return as the basic interest rate, the Selic, advances.

“For some time now, Brazilian investors have seemed more skeptical, reducing their positions on the stock market, while foreigners have, to a certain extent, maintained this allocation, taking advantage mainly when the dollar starts to appreciate”, says Adauto Lima, chief economist at global manager Western Asset.

Among the preferences on the foreign radar, names from the financial sector, such as large banks and insurance companies, in addition to large commodity exporters, usually stand out.

In a report published this Monday (10), Bank of America (BofA) analysts David Beker, Paula Andrea Soto and Carlos Peyrelongue say that they maintain a positive vision for 2022 in relation to the large Brazilian banks and the names most dependent on the dynamics. global economy, as exporters of meat, oil and aluminum.

“The portfolio reflects our concern with higher interest rates in the United States, the elections and the macroeconomic challenges in Brazil”, say the specialists of the American bank, which has a neutral vision for the Brazilian market, with preference in Latin America fitting in this to Mexico, due to its greater proximity to the American economy.

Here, Bradesco and Porto Seguro, as well as Usiminas, PetroRio and JBS, are among BofA’s favorite stocks in Latin America for the next 12 months.

“As the market undergoes a repricing to incorporate the higher capital costs [reflexo da alta da taxa de juros], we consider that the large banks and insurance companies are good options in relative terms, and still at attractive prices”, say BofA analysts.

But as the year progresses, projections become more cautious.

Analysts at the American bank also point out that the behavior of the Brazilian stock exchange should continue to be highly volatile throughout 2022.

They predict that the Selic rate will be raised to 10.75% by the BC (Central Bank) at the next Copom (Monetary Policy Committee) meetings, which tends to drain resources from the stock exchange for fixed income.

“The move towards a double-digit interest rate has already started an exit rotation of equities in Brazil that may only be in the beginning”, says the BofA report.

Maurício Nakahodo, senior economist at MUFG (Mitsubishi UFJ Financial Group), points out that, according to the financial institution’s calculations, the basic interest rate, the Selic, should reach 12.25% in mid-May.

Even so, he continues, it should not be enough to prevent a further devaluation of the real against the dollar, given the uncertainties in the domestic sphere due to the elections.

“Election years always bring uncertainty about the conduct of economic policy from next year, regardless of who is elected, which can soften the foreign flow”, says the senior economist.

The bank expects the currency to be quoted at BRL 5.80 in December 2022, compared to the market median of BRL 5.60 indicated by the BC Focus report.

According to Nakahodo, the US central bank should start the monetary tightening cycle during the first half of the year, which will tend to cause the dollar to strengthen against most other global currencies, in the wake of the migration of investors to the US market. .

Lima, from Western, adds that the fact that Brazil has not been able to show robust economic growth over the last few years may also contribute to keeping foreigners a little more cautious with the country in the coming months.

“Brazil cannot enter into a dynamic of growth recovery, which ends up alienating foreign investors”, says the economist.

“Emerging markets have become cheaper both in relation to developed countries, as well as against historical averages. We have seen a continuous increase in the risk premium, but macroeconomic headwinds call for a little patience for a more optimistic stance”, says Vinicius Malhães da Silva, senior vice president and emerging markets manager at Pimco.

Silva adds that the deterioration of fundamentals and the de-anchoring of macroeconomic expectations will serve as amplifiers for the increase in volatility and the reduction of confidence already naturally expected for the election period.

“In this sense, the 2022 elections blend into the more medium-term horizon, as the costs of normalizing both monetary and fiscal policy are increasing and will only be fully known after a new government is elected,” he says. Pimco’s manager.

He adds that, although the Brazilian macro framework has shown to be resilient to different recent crises, he sees much more specific and punctual than structural opportunities in favor of assets in the local market for the coming quarters.

“We believe that the higher risk premiums reflect a clear worsening of expectations and heightened uncertainty, but not necessarily the totality of the different possible future scenarios.”