Brazilian investors have been selling their equities due to growing concerns over the country’s problematic fiscal policy. The Ibovespa index in Brazil has dropped 20% since early June, making it the market with the worst losses in 2021.
However, some international investors see this as a rare opportunity to buy stocks at a bargain price. Over the past month, international buyers have spent $2.2 billion on Brazilian stocks.
What’s next for the Brazilian market?
While prices are low in Brazil, it doesn’t necessarily mean that they’re a bargain. Other equity markets around the world have risen quickly despite inflation and predictions of slowing economic growth. Investors should consider why the Brazilian market is different before investing.
While the current Brazil index prices may offer great value in comparison to earnings, the upcoming presidential elections in 2022 make the country’s economic future uncertain. Investors looking to minimize risk may want to look to more stable markets for their investments.
Is it worth the risk?
Investing in Brazilian stocks this quarter may seem like a good bet for those unafraid of the upcoming presidential election’s uncertainty. However, some analysts believe that the market’s price-to-earnings ratio is thrown off by commodity producers’ record profits, while others think that the instability of the Brazilian real means that stock prices can’t rise until local investors rally behind their own market.
For investors attracted to risky plays that could pay off big, Brazil may look tempting. But it’s essential to keep an eye on the country’s politics for increasing volatility and unrest.
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