Amid a volatile year, investors have more questions than ever about Brazil — and the country’s top research providers are here to provide answers.

“One of the most frequent questions from investors describes well the state of Brazilian equities over this past year: Are Brazilian equities a value trap or a value play?” observed André Carvalho, director of research at Bradesco BBI. Brazilian equities have been trading with depressed multiples and high-risk premia, he added, and the current consensus forecast for the next 12-month price-to-earnings ratio is more than two standard deviations below its historical average.

Carvalho said five “fat negative tail risks” are weighing on the market, including three global and two domestic risks. “In the first group, there is concern about Chinese growth collapsing, risks related to the war in Ukraine, and a possible hard landing in the U.S.,” he said. “In the second group, [there are] concerns about high and sticky inflation in Brazil as well as elevated uncertainty about the fiscal anchor after the presidential election. In our view, these five key risks will be critical to the upcoming performance of Brazilian equities.”

Amid this volatility, the buy side has stuck with domestic research firms for market insights: Bradesco BBI and BTG Pactual have once again tied for first place in Institutional Investor’s 19th annual All-Brazil Research Team.

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