Brazil stocks on course for another slow year under rampant pandemic

MEXICO CITY: Brazil’s equity market is on course for its second slowest year since 2015 as the coronavirus pandemic continues unabated in Latin America’s biggest economy, offsetting good results from local companies, a Reuters poll showed.

The benchmark Bovespa stock index has stayed shy of January’s record high of just over 125,000 points, with investors worried about the mounting human and financial toll of COVID-19 in Brazil, but will surpass that peak by year-end.

The Bovespa’s outlook at end-2021 was downgraded to 130,000 points, according to the median estimate of 17 responses in the poll taken May 10-25 among equity strategists, compared to 134,500 points in February’s survey.

This would imply a historically modest rise of 4.8% from its value at the start of the week and a 9.2% increase this year, the smallest gain for the index since 2015, barring a marginal advance of 2.9% in an atypical 2020 for global markets.

“Volatility resulting from developments around the pandemic and political issues is expected to remain high, but we can observe a record profit scenario for Bovespa index companies in 2021”, Henrique Esteter, a Guide Investimentos analyst, said.

“We have seen a repetitive pattern on the Bovespa for some time now, in which companies in the basic materials sector have sustained the index, while sectors linked to the reopening of the economy are unable to maintain their gains”.

With cases falling in much of the rest of the world, South America is the only region where new infections are rising rapidly on a per capita basis, according to Our World in Data, while India is also struggling.

Most of the deaths in Latin America - more than 440,000 - have occurred in Brazil, which became a coronavirus epicenter this year with the second-deadliest outbreak outside the United States, though it appears likely to be surpassed soon by India. Views in Mexico were more optimistic, as the median estimate for the S&P/BMV IPC index for the end of 2021 rose to 51,100 points compared to 48,650 in the last survey. It would lead to a yearly gain of 16% in Mexican equities.

Contrary to the Brazilian benchmark, the S&P/BMV IPC has charged ahead since the start of the year and is now close to its 2017 record high above 51,700, powered by a recovering economy and improving vaccination effort.