As per Ajay Kapur’s words:
“We have cited risks in Brazil for Asia for over a year now. While “this time is different”, and most investors (and most colleagues) are incredulous, we think the market is now recognizing this risk. Brazil is the only large equity market to be in a proper bear phase this year. We do not claim any special insights into the nitty-gritty of Brazil, but we have run all the Asian markets and Brazil through our “financial vulnerability” indices. Brazil stands out because of its credit metrics, its overvalued currency and its current account deficit (at a time of a massively positive terms-of-trade).
While many argue that this is a “normal” credit cycle in Brazil, and stability is leading to more financial intermediation, we are wary of sharp increases in credit multipliers (the ratio of loans to the monetary base) anywhere. These are proxies for animal spirits in any fractional reserve banking system, and sharp increases tend not to end well.”
Full article here.

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