Concern about inflationary pressure, the low competitiveness of the Brazilian economy and greater government intervention in the private sector have shunned foreign managers from the stock market in Brazil.
This year, while funds focused on emerging markets raised $30.8 billion, portfolios focused on Brazil had an outflow of $307 million by February 12… American fund manager Pimco, one of the world’s largest with $2 trillion under management, and AlliansceBernstein currently are underweight on Brazil stocks.
Pimco has been underweight on Brazil for almost two years. “The Brazilian economy, except for the basic materials segment, is not competitive,” said a company VP. Of the total $2 billion under management in emerging market stocks, Brazilian companies account for about 6%, lower than the share Brazil has in the benchmark indexes for these markets.
AlliansceBernstein, which has $14 billion under management focused on emerging markets, is also less optimistic with Brazil this year and keeps an underweight position for the country. “Low economic growth combined with high inflation turns the environment adverse for investments”, said the EM portfolio manager at AlliansceBernstein.
“We are very cautious about the continuity of government intervention in the group of Brazilian companies,” said PIMCO.
American asset-management firm BlackRock has cut its weight in shares of Petrobras. Nevertheless, the asset management is still overweight on Brazil, which currently accounts for 66% of the total under management in Latin American stocks: $6.5 billion.
As for JPMorgan Asset Management, the focus has been companies linked to the Brazilian domestic market with growth potential. “We tend to focus on companies that are generating cash flow and should benefit from a growth recovery,” said the company CIO.
Foreign fund managers also see attractive prices in shares of big banks such as Itaú Unibanco and Bradesco. “Investors are a little pessimist about the margin squeeze, but we think that ROE should be sustained in the medium term,” said Alliance.
BlackRock’s Latin America portfolio has its largest weight in Brazil with shares in highway company CCR. “The company has shown capital gains, besides paying good dividends”, says Mr. Landers.
The Pimco fund manager sees no major devaluation of the Brazilian stock market this year. However, a bigger gain of Ibovespa, she says, will depend on the investment level of Brazilian companies.
Last year, government´s growth expectations were dashed and the country, according to Pimco, must regain investors’ confidence.
Full article: Valor