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Brazil markets post best day since 2020 as Bolsonaro outperforms polls

Economy Oct 03, 2022 07:06PM ET
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© Reuters. FILE PHOTO: Brazil's President and presidential candidate Jair Bolsonaro reacts after the results of the first round of Brazil's presidential election, at the Alvorada Palace in Brasilia , Brazil October 2, 2022. REUTERS/Ueslei Marcelino
 
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By Tatiana Bautzer, Camila Moreira and Gabriel Araujo

SAO PAULO (Reuters) -Brazilian markets surged on Monday, as a stronger-than-expected performance by President Jair Bolsonaro and his congressional allies in the first round of a general election eased concerns about sharp changes in economic policy.

Brazil's currency strengthened more than 4% against the dollar, while the benchmark Bovespa equities index jumped 5.5%, its biggest one-day gain since April 2020. Several companies rallied over 10%, while preferred shares of state-run oil company Petrobras closed 8% higher in Sao Paulo.

Bolsonaro's leftist challenger, former President Luiz Inacio Lula da Silva, fell short of clinching victory in the first round of voting on Sunday. Lula finished ahead of Bolsonaro by 5 percentage points, far less than the 7-17 points advantage forecast by major pollsters.

Bolsonaro's allies also had a strong showing in voting for Congress, limiting Lula's room for dramatic policy changes if he does return to the presidency.

Marcos Casarin, chief Latin America economist at Oxford Economics, said the results for Lula's Workers Party in the congressional elections suggested Lula "would have to form a wide coalition with his former opposition to be able to govern with stability."

"We think this is as close as possible to a best-case scenario for investors," wrote Casarin.

Some investors wagered that Bolsonaro, while not favored, could eke out a second-round win, allowing him to push forward pro-market reforms and privatizations.

"I think people will see reforms as more probable," said Ricardo Lacerda, founder and CEO of investment bank BR Advisory Partners.

The renewed chances of re-election for Bolsonaro boosted shares in state-controlled companies in expectation they could be privatized should he secure another four-year term.

In addition to gains for Petrobras, shares in state lender Banco do Brasil SA (OTC:BDORY) closed up nearly 8% on Monday. The gains came on a strong day for global markets, with Wall Street up over 2%.

Results in southeastern states such as Sao Paulo and Minas Gerais also affected stocks with political exposure there.

Bolsonaro's former Infrastructure Minister Tarcisio Freitas came out of Sunday's vote leading the gubernatorial race in Sao Paulo. Shares in state sanitation company Companhia de Saneamento Basico do Estado de Sao Paulo, known as Sabesp, rose 17% on Monday, the biggest gainer on the Bovespa, based on expectations Freitas could privatize it.

Shares in public power company Cemig and sanitation firm Copasa, both in Minas Gerais rose 11% and 19%, respectively, after the re-election of pro-market Governor Romeu Zema.

The only losers on the Bovespa were education companies, seen as beneficiaries a Lula win, as the leftist candidate has been said he would boost public student loans if elected.

YDUQS nearly 2% and Cogna edged 0.3% lower.

Analysts at Guide Investimentos said that although sectors such as education, capital goods and retail were set to benefit from an eventual Lula government, the impact would be limited by the new right-leaning composition of Congress.

Gustavo Cruz, strategist for RB Investimentos, said the hard-fought race showed that neither candidate would receive a mandate to implement radical policies.

"Whoever is the winner, he will not have a blank check from the electorate," he said.

Brazil markets post best day since 2020 as Bolsonaro outperforms polls
 

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Comments (4)
João Schmitt
João Schmitt Oct 05, 2022 9:48PM ET
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It’s incredible to see how outsiders have such passionate opinions about how Bolsonaro is “fascist” (without any concrece argument) and forget to mention that his counterpart Lula has been indicted as the leader of the largest corruption scheme in Brazil’s history, embezzling MILLIONS of dollars from federal healthcare programs.
Nicholas
Nicholas Oct 05, 2022 9:48PM ET
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personally from Brazil... that is a fact!unbelievable.some people would prefer a criminal who left our country broke over a president who simply isn't intimidated by mídia and tells it how it is.
Nicholas
Nicholas Oct 05, 2022 9:48PM ET
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personally from Brazil... that is a fact!unbelievable.some people would prefer a criminal who left our country broke over a president who simply isn't intimidated by mídia and tells it how it is.
Nicholas
Nicholas Oct 05, 2022 9:48PM ET
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personally from Brazil... that is a fact!unbelievable.some people would prefer a criminal who left our country broke over a president who simply isn't intimidated by mídia and tells it how it is.
Rob F
Rob F Oct 04, 2022 10:51PM ET
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What an absolutely ridiculous propaganda piece, I'm sure stocks are not up because dictator and unhinged lunatic bolso had some percentage points more, but because his opponent won the first round.
João Schmitt
João Schmitt Oct 04, 2022 10:51PM ET
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Dictator bolso? Did you forget to mention that his opponent is the one who sympathizes with all latin american dictatorships?
Maximus Maximus
Maximus Maximus Oct 03, 2022 10:51PM ET
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fascist criminal bolsonaro running the country down the toilet while the markets cheer? you couldn't make this s#it up..
Surf Photography
Surf Photography Oct 03, 2022 10:51PM ET
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People who like corrupt is ? Whats the name ? Oh criminal .
João Schmitt
João Schmitt Oct 03, 2022 10:51PM ET
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I’m shocked that people banalize fascism. Please be more specific and tell us how exactly the executive government has been “fascist”? You’re dishonoring the real victims of fascism when you slander such atrocities
leehiung chong
leehiung chong Oct 03, 2022 6:47PM ET
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Lula won more votes but financial markets cheer is for Bolsonaro instead? weird interpretation?
Rob F
Rob F Oct 03, 2022 6:47PM ET
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Those most be unhinged bolso propagandists, they clearly don't know what they're doing, maybe they're part of an evangelical sect, well, actually it turned out that bolso is even a freemason, so there's that
Surf Photography
Surf Photography Oct 03, 2022 6:47PM ET
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Lula is corrupt , friends os maduro, chavez , ortega. Isn’t enough?
Surf Photography
Surf Photography Oct 03, 2022 6:47PM ET
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Lula is corrupt , friends os maduro, chavez , ortega. Isn’t enough?
 
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