By Gabriel Burin
BUENOS AIRES (Reuters) - Brazil's stocks are likely to rebound in 2022 from this year's steep decline, as investors hunt for bargains but stay on the alert to an uncertain political situation in the run-up to the country's presidential vote, a Reuters poll showed.
The Bovespa stock index is down 13.7% year-to-date, headed toward the deepest annual slide since 2013, when Brazil was descending into a serious domestic crisis. The Bovespa is trading at 102,741 points, close to its lowest level in 12 months.
Local markets face a renewed surge of fiscal worries after the government relaxed its grip on the budget in a move seen as a sacrifice of austerity to shore up President Jair Bolsonaro's dwindling re-election chances.
Fears of a resurgent pandemic due to the Omicron variant of COVID-19 are also weighing on Brazilian assets, as are growing prospects for higher interest rates in the United States.
However, Sao Paulo stock exchange values are now so cheap that the Bovespa should recover 17.3% from its level on Tuesday, finishing next year at 120,500 points, according to the median estimate of 12 equity strategists polled Nov. 16-30.
"The degree of uncertainty in Brazil is such that domestic assets have dropped to historically low levels considering price/earnings ratios," Joao Guilherme Penteado, CEO of Apollo Investimentos, said.
"From there, a positive bias for Brazilian assets could easily emerge if uncertainties diminish ... still, the 2022 election could be the most difficult for the country in the last 30 years," he added.
Former President Luiz Inacio Lula da Silva leads opinion polls and last week met French President Emmanuel Macron, sparking an angry reaction from Bolsonaro https://www.reuters.com/markets/rates-bonds/bolsonaro-denounces-macron-lula-meeting-provocation-2021-11-25. Neither has officially declared their candidacy for the Oct. 2022 vote.
The encounter with Macron and its fallout show how Lula aims to capitalize on Bolsonaro's diplomatic isolation. This year, Brazil's Supreme Court overturned Lula's conviction in 2018 on charges of taking bribes from engineering companies.
Mounting doubts about Brazil's politics have weighed on the Bovespa. The survey's median estimate of 114,000 points by mid-2022 was well below 130,000 points seen in August.
Economic worries have added downward pressures on Brazilian stocks. High inflation and slow growth are expected to persist next year, according to a separate Reuters poll.
Meanwhile, Mexico's S&P/BMV IPC stock index is up 11.6% so far in 2021, on track for its biggest annual gain since 2012. On Tuesday the index was at 49,171 points, and investors expect further gains next year.
Mexico's IPC was forecast to reach 56,250 points at the end of 2022, about 14.4% higher from where it was hovering on this week, getting close to this year's record levels just above 53,000 in the second-half.
(Other stories from the Reuters global stock markets poll package:)
(Additional polling by Miguel Angel Gutierrez in Mexico City and Andre Romani in Sao Paulo; Additional reporting by Tushar Goenka in Bengaluru; Editing by David Gregorio)