B3 error generates criticism on the internet, but does not frustrate analysts

​The year-to-date rise of approximately 16% on the Brazilian Stock Exchange is largely due to the flow of foreign capital in search of opportunities in emerging markets.

On Thursday (31) XP even raised its forecasts for the closing of the Ibovespa stock index in December, having among the reasons for this the good moment experienced by the country from the perspective of foreigners.

B3’s data that pointed to an entry of around BRL 91 billion on the Stock Exchange in 2022, however, were wrong.

B3 reported on Friday (1st) a review according to which the balance of foreign capital flow on the Stock Exchange actually corresponds to BRL 64.1 billion, a drop of 29.6%, or around BRL 27 billion.

“The data that we had been releasing since October 2020 were including stock lending operations made via the screen [quando o serviço passou a ser oferecido pela B3]. But this type of operation does not have a financial flow, that is, there is no payment from one side to the other. It’s just a loan, and it shouldn’t be counted as a purchase or a sale,” said Luis Kodic, director of products and data at B3, during a press conference on Friday.

According to Kodic, the error was discovered in the midst of an internal review process by the company itself, and also based on inquiries from customers.

The data now reflects transactions in the spot, options and forward markets, excluding asset lending data.

The loan operation is usually done when an investor wants to be “short” in a stock, according to market jargon, in the expectation that the stock will depreciate later on. In this case, he borrows the stock from someone willing to rent the paper for a fee, with the prospect that it will be cheaper in the coming weeks.

The stock exchange error that inflated the volume of foreign investments on the Stock Exchange generated a series of reactions on social networks.

Most publications criticize B3’s failure in relation to the transparency of the numbers, pointing out the lack of confidence in the company’s upcoming disclosures, as well as the mislead by small investors.

Despite the critical tone of most posts, there are also those who see a positive side in the error.

“Glass half full or half empty? Where they only see the mistake, I see a great opportunity to enter these [R$] 30 billion in the coming months on the Stock Exchange”, says a post made by XP’s chief strategist, Fernando Ferreira.

On Thursday, XP revised its projection for the Ibovespa at the end of the year from 120,000 to 130,000 points. The flow of foreign capital to the local market was pointed out by the broker’s specialists as one of the reasons for the greater optimism with the performance of the shares.

“We met with several foreign investors recently to assess their perceptions of Brazil. We see growing optimism about the country,” says the XP report.

Although B3 made the disclosure about the revision in the data while the market was still open on Friday, the announcement did not generate major impacts on asset prices – the dollar once again closed down against the real, while the stock exchange closed up 1.3%, at 121,570 points.

“In my opinion, the review does not take away the strength of the flow of funds from foreign investors entering our financial market, either through the still cheap stock exchange, or because of the attractive double-digit interest rate”, says Pedro Galdi, an analyst at Mirae Asset. Wealth Management.

“It really is a huge mistake. Even so, we have a very expressive flow of R$ 60 billion in the year”, says Rafael Ihara, chief economist at Meraki Capital Asset Management.

He also says that, even in dollar terms, the Brazilian stock exchange is one of the best performers among the main assets on a global scale, second only to oil. “So, although bizarre, [o erro da B3] should not change the agents’ perception”, says the economist.