Brazilian stocks hit a speed bump

Brazilian stocks have doubled in two years, but that momentum is now slowing.

Andrew Van Sickle
By
published
in Features

Brazilian stocks have doubled in two years. But recently investors have decided they were "previously wrong to price Brazil to perfection", say Andres Schipani and Jonathan Wheatley in the Financial Times. The bounce was fuelled by Michel Temer, a market-orientated president with an encouraging structural-reform agenda. A revamp of Brazil's expensive public-sector pensions is a key element of Temer's programme, but it looks less likely now. In the past three months, Temer has had to fend off two attempts in the lower house of Congress to expel him from office owing to graft allegations, and his room for manoeuvre is further constrained by national elections due in October 2018. Lawmakers will be loath to tout "a deeply unpopular reform."

This isn't the end of the reform story, says Capital Economics, but momentum will slow. Measures that merely require a majority in Congress, such as privatising state assets, will pass, but anything needing a constitutional amendment (implying a 60% majority in both houses of Congress), such as pension reform, looks "doomed". The rally could be over for now.

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Andrew Van Sickle
Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.

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