War in Ukraine should bring more interest rates and appreciation of the real, managers predict

​The global macroeconomic impacts as a result of the war between Russia and Ukraine, with an increase in international commodity prices and high inflation, should contribute to the recent appreciation of the real to continue in the coming weeks.

In the opinion of fund managers, the inflationary pressure imported by Brazil due to conflicts and the shock in the supply of raw materials in Eastern Europe may force the BC (Central Bank) to be even more aggressive in the process of tightening monetary policy.

The ever-increasing interest rates of the Selic rate, in turn, tend to continue favoring Brazil on the radar of international investors looking for opportunities in emerging markets.

In particular, with high commodity prices and the migration of resources from investors who are expected to leave the Russian market in response to the invasion of Ukraine.

Partner of asset manager Parcitas Investimentos, Bruno Leite says that, in the wake of the economic impacts brought about by the war, he decided to increase in the funds’ portfolio the bet on the appreciation of the real, as well as the exposure to fixed short-term interest, in view of the expectation of that the BC may need to be tougher in the monetary tightening process.

With the price shock caused by the conflict in Europe, economists began to predict a higher IPCA (Extended Consumer Price Index) than previously projected, with the price index being able to test levels of up to 6% this year and a interest around 13%.

In the most recent Focus report, the median of estimates by economists consulted by the BC pointed to inflation of 5.65% in 2022, accompanied by a Selic of 12.25%. The forecast for the dollar at the end of the year was R$ 5.40.

The dollar closed the week at R$ 5.053 for sale, with a devaluation of approximately 9.4% of the American currency against the real in the accumulated result for the year. “The dollar can pierce the floor of R$ 5 and experience levels around R$ 4.80”, says Leite.

“The BC will have difficulties to interrupt the cycle of high interest rates”, says the manager of Parcitas. He adds that the real also tends to appreciate at times when commodity prices are high, due to the positive impact on the country’s terms of trade.

The price of a barrel of Brent oil has been on a steady upward trajectory in the international market since the conflicts in Ukraine began, with a price around US$ 112.67 (R$ 566.15) on Friday (11). ).

“This scenario of uncertainty requires that convictions be checked. It is necessary to be more selective in choosing the risks taken”, says José Monforte, manager of Vinland Capital.

Among the theses that were reinforced due to the war, Monforte points out the need to increase interest rates in the United States. He assesses that the US central bank will have to act more firmly to control the growing inflationary pressure brought about by the rise in commodities.

Because of this, the manager claims to have opted to increase the positions that benefit from the rise in the interest rate market in the United States.

In the local sphere, Monforte also bets that the real will continue to strengthen against the dollar.

Even with the forecast of a more aggressive cycle of increase in US interest rates that tends to attract resources to the United States, the specialist also sees the current level of commodity prices, and the Selic, exerting a greater weight on the exchange rate.

“In addition, we increased the portfolio’s exposure to the universe of stocks producing energy, agricultural and metallic commodities, which benefit from higher international prices”, says Monforte.

Partner and manager of Novus Capital, Luiz Eduardo Portella says that the sanctions against Russia and the potential economic impact transmitted to other countries on the European continent have a global recessive effect that could lead to a decompression of inflation in developed countries.

In this scenario, the central banks of these countries may review their stance on the pace of the cycle of high interest rates, predicts the manager of Novus.

“We have reduced a lot, but we still maintain the position taken [que ganha com a alta] in international interest rates, mainly in the United States”, says Portella, adding that, also due to the expectation of lower interest rates abroad, he got rid of a position known in market jargon as “sold” on the American Stock Exchange, which benefits from the stocks fall.

In a similar vein, the global manager BlackRock pointed out in a recent report that she sees the Russian invasion of Ukraine as a more favorable scenario for the stock market of developed countries, due to the perception that the event will have a negative impact on economic growth, with less need, therefore, , of rising interest rates.

“The central banks of the United States and Europe may have to be more restrained in raising interest rates, but the rise will have to occur. It is an inflationary crisis for prices and disinflation for growth”, says Carlos Calabresi, partner and investment director from Garde Asset Management.

“I still think that the position gained from the high interest rates abroad is good. But, given all this uncertainty in Ukraine, it is necessary to adjust the size of the position”, adds Calabresi.

Regarding the exchange rate, the Garde manager echoes the pairs and understands that there is room for the gains of the real against the dollar to continue, given the flow that predicts that it should continue towards the Brazilian market.

B3 data show that foreigners contributed something like R$ 67.5 billion in the Brazilian stock market in 2021, until March 2. In the consolidated for 2021, this volume was R$ 102.3 billion.

Analysts at Itaú BBA project that Brazil may receive a foreign flow of approximately R$7 billion, following the decision of the MSCI company to exclude Russia from the benchmark indexes dedicated to emerging markets.

“I believe that the flow of foreigners to the local market will continue. Brazil has everything that investors want right now, which is high interest rates and commodities. And now without Russia as a big emerging on the radar, the flow will end up overflowing.” for Brazil”, says Portella, from Novus, who says he also has positions in the real and in the Ibovespa index, given the relevant weight of commodities and banks, the main focus on the radar of foreign pockets.

“The war intensifies some issues that were already on the radar, such as inflation, which is a problem in Brazil and in the world”, says Philipe Biolchini, investment director at Bram (Bradesco Asset Management).

Biolchini says that the funds’ portfolios already had a more defensive profile even before the war, in an environment of pressured inflation and the prospect of rising global interest rates.

With the conflicts in Europe, the cautious posture must continue until it is possible to have greater clarity on how this event will unfold and its economic consequences, says the investment director,

“We have privileged small and tactical positions”, says Biolchini, who, unlike his peers, no longer sees much room for the appreciation of the real to continue for much longer. “We are starting to think that it is already at a level of support where it should not have much more appreciation.”