Institutional Investor’s 14th annual ranking of Brazil’s best research teams resulted in a three-way tie, with BTG Pactual, Itaú BBA, and J.P. Morgan sharing first place overall.
Each year, Institutional Investor ranks the top research firms and sector-specific teams that serve investors in the Brazil markets. Although BTG Pactual and Itaú BBA have rated as the top two research firms every year since 2010, J.P. Morgan’s rise to the the top comes after back-to-back fifth place finishes.
The 2017 survey was sent to 725 buy-side analysts and portfolio managers from 385 institutions managing an estimated $157 billion in Brazilian equities and $199 billion in Brazilian debt.
Analysts ranked this year pointed to an upcoming presidential election, as well as looming interest rate increases, as the biggest potential impacts on the Brazilian economy in the coming months. Brazilians will hit the polls in October 2018, choosing the next president and vice president as well as electing the National Congress, state governors and vice governors, and state legislative assemblies.
“On a macro basis, next year is an election year in Brazil,” Antonio Junqueira, electric and utilities analyst at BTG Pactual, said by phone. “It will be extremely important.”
Junqueira and his team placed first in the electric and utilities industry. Junqueira said that whoever is elected will have an impact on his sector because they could change the way electric utilities are priced.
“Our economy didn’t grow much over the last three years,” he said. “We need to provide deep, cost-cutting reforms.”
Renata Faber, whose team at Itau BBA ranked first in the capital goods sector, said she will also be watching the election closely.
“The political uncertainties are definitely not good for investments,” she said by phone. “The capital goods sector depends a lot on higher investments.”
Analysts also said they would pay close attention to interest rates, which Junqueira predicted would “probably go up a lot.”
J.P. Morgan’s Fernando Abdalla, who ranked first in his coverage area as a senior analyst for Latin America transportation, said that the interest rate reduction cycle has been significant for his sector, in part because it has reduced the cost of debt. Faber agreed.
“Lower interest rates are also benefitting the capital goods sector,” she said. “Many companies which are highly leveraged will have better financial expenses. The decisions to invest are a bit easier.”
Although a rise in interest rates could reverse some of these positive effects for businesses, Santander’s Daniel Gewehr said it could spur domestic equity investments.
“Domestic investors are not putting money in Brazil,” said Gewehr, whose team ranked first in the equities strategy category. “As interest rates change, investors will likely take money out and put it into the equities market.”
Gewehr’s firm ranked seventh overall, dropping two spots from last year’s fifth place finish. Bradesco BBI came in fourth, climbing from eighth place last year. This year’s top five was rounded out by another tie, with Bank of America Merrill Lynch and Credit Suisse sharing the No. 5 spot.