Brazil share sales seen recovering after 2011 slump

Brazilian stock sales, which took their steepest-ever plunge in 2011, will recover this year as risk-taking gains traction and Europe's debt crisis shows signs of easing, the group representing the local investment-banking industry said on Friday.
Investors who for most of 2011 piled up cash to cushion themselves from the deterioration of Europe's fiscal woes might snap up emerging market stocks and bonds this year, said Alberto Kiraly, a vice president at industry group Anbima. Their return will be gradual, he noted, adding that pricey offerings may fail to lure their attention. Companies in Brazil raised 18.98 billion reais ($10.3 billion) from the sale of new and existing shares in the domestic market last year, 87 percent less than in 2010, Anbima said in a report on Friday.
"The mainstream perception is that Brazilian equities are cheap and that growth is at least taking place here - in a world that is barely expanding," Kiraly said. "But investors will be selective and price-sensitive. Their return won't be hasty." Initial public offerings and follow-on share sales tumbled not only because of concern over Europe, but also as domestic policy uncertainty crippled demand for equities.
Throughout the year, domestic and foreign investors also balked at timid government efforts to combat inflation, which reached seven-year highs during 2011. The central bank began cutting interest rates in August, after five consecutive hikes. The August cut, which was not expected by any of the 20 analysts surveyed by Reuters, kept investors wary of unpredictable policy moves.
Foreign investors participated in 56 percent of equity sales in Brazil, down from an average 70 percent for most of the past decade. The share of foreign investor participation in IPOs and similar deals "should show some improvement, depending on external market conditions," Kiraly said. The amount of capital raised from stock sales is the lowest since Anbima started gathering data for the indicator in 2006. In contrast, sales of fixed-income instruments such as bonds, notes and asset-backed securities rose to a record 93.68 billion reais. Private placements, or sales agreed to by the issuer with a single investor or investment group, accounted for 85 percent of bond sales in the domestic debt market, Anbima noted.