Volatility has returned to Brazil. Through much of last year
and the first weeks of 2010, the nations benchmark Bolsa
de Valores, Mercadorias e Futuros Bovespa index seemed capable
of going in only one direction up but financial
crises half a world away have reminded investors that what goes
up can and often does come down.
The turbulence makes little sense in light of the fact that
Brazil is less affected by external factors than ever, owing to
robust domestic growth. The most important highlight from
this period is the continuous outperformance of
consumer-related stocks over the commodity
producers, explains Carlos Constantini, head of research
at Itaú Securities in São Paulo.
The second half of 2009 was wonderful the
market was on a nonstop tear, adds Rodrigo Góes,
co-head of research at BTG Pactual in São Paulo.
The Bovespa index hit 70,451.11 in January, a gain of 72.6
percent over one year earlier, then plunged to 62,762.70 the
following month amid investor concerns that the debt crisis in
Dubai and speculation of an even more serious situation in
Greece would set back the worlds faltering economic
recovery. Once it became apparent that those two crises could
be contained, investors returned to Brazilian equities and sent
the Bovespa soaring to 71,784.78 in April.
The rally didnt last long. That month, China
one of Brazils primary trading partners announced
that it was curtailing its stimulus spending in an effort to
cool its own overheated market; skittish investors, concerned
about the impact a downturn in China would have on Brazil,
abandoned Brazilian equities in search of safer havens. By May
the index had plunged to 58,192.08.
The Bovespa has recovered a bit, but volatility has
been the norm and probably will continue to be,
Góes explains. The fundamentals of the Brazilian
economy are solid and would probably warrant higher valuations
for the Bovespa, but the shaky global economic environment has
been preventing it from performing better.
Trying to make sense of the these wild gyrations has been
challenging. Money managers need insight into the markets
mood swings, and investors say no firm does a better job of
providing the type of research they deem essential than
Itaú Securities, which leads the 2010
All-Brazil Research Team, Institutional
Investors seventh annual ranking of the nations top
equity and fixed-income analysts. Itaú, which
captured second place last year, wins 14 total team positions,
four more than in 2009.
Two firms tie for the No. 2 spot: BTG Pactual, the outfit
that was created last September when Rio de Janeirobased
asset management firm BTG Investments bought last years
top-ranked UBS Pactual, and Credit Suisse, which jumps
from No. 4. The firms claim 12 team positions each, up from 11
and nine, respectively.
J.P. Morgan nearly doubles the number of its positions, from
five to nine, and in so doing rises two rungs, to fourth.
Rounding out the top five is BofA Merrill Lynch Global
Research, which falls from No. 2; the firm wins eight
positions, down from ten in 2009. Results are based on
responses from more than 400 asset managers at some 250
institutions, domestic and foreign, managing $240 billion in
Brazilian equities and $72 billion in Brazilian debt.
The volatility in Brazils stock market is echoed in
investment research operations, with wild fluctuations in the
number of analysts employed and companies covered. Itaú
has 30 analysts covering Brazil, six fewer than last year after
the firm reassigned some researchers to other Latin American
markets; even so, the number of Brazilian stocks Itaú
analysts track increased, from 125 to 129, Constantini
BTG Pactual added ten researchers to the 18 it acquired from
UBS and increased its coverage universe from 68 companies to
107. When BTG took us over, they gave us a generous
budget to find the best people, says Góes, who is
the top-ranked analyst in Aerospace, Transportation &
Industrials for a sixth consecutive year. (Analysts ranked No.
1 in their respective sectors are listed and the complete list
of winning analysts, including those ranked second, third and
here.) We added head count to every single sector and
are still expanding. We plan to add another 25 stocks to our
coverage universe by year-end.