During these days one of the focus of attention of the financial markets is being Brazil due to the presidential elections that are being held in the first Latin American economy. The importance of this vast country is due to the weight that it has as one of the main emerging markets in the world and that it can pollute other economies of special relevance, as in the specific case of Argentina. This is one of the reasons why investors' eyes are on this nation of more than 180.000 million inhabitants.
The elections have produced that the nationalist candidate arrives at the return with a wide advantage over his political rival. Because indeed, the far-right aspirant, Jair Bolsonaro, added 46,03% of the valid votes in the elections held this Sunday, which places him in the position of favorite for the second round of elections to be held on October 28. Against the leftist representative Fernando Haddad, former mayor of Sao Paulo and candidate of the leftist Workers Party (PT), led by Lula da Silva, who has obtained just over 28%.
The reaction of the markets discounts a victory for the right-wing politician since as the polls widened the difference in intention, the Brazilian stock market rose, even with hikes around 3% in the days prior to the development of these important presidential elections. This in practice means that the Brazilian stock market is betting on the candidacy of Jair Bolsonaro, estimating that it is more likely to promote the measures expected by financial agents in the Rio de Janeiro country. Faced with a certain fear of the economic plans that the rival has presented in these elections.
Brazil: upward trend in the stock market
The most relevant stock index has greeted the triumph of the far-right politician with significant increases. In this sense, after the victory of Jair Bolsonaro in the first round of the elections on Sunday, the São Paulo Stock Exchange opened this Monday with a strong rise of 6%: in the first 20 minutes of operations, the Bovespa index it was positioned up to 87.262 points. One of the most bullish indices in the world and in contrast to the stock exchanges of the old continent that were being carried away by a selling trend weighed down by the economic measures taken in Italy.
The Brazilian index is the Bovespa and it is one of the most important and is made up of 50 companies listed on the important Sao Paulo Stock Exchange. In any case, this index is made up of the titles of the companies that represent 80% of the volume traded in the last 12 months. It is reviewed quarterly, to maintain the degree of representation of all the shares traded in the market. To the point that it is one of the reference points for small and medium investors in this vast geography area on the other side of the Atlantic.
Presence of Spanish companies
One of the motivations for following the Rio de Janeiro stock market during these days is due to the strong implantation of Spanish companies in this country. Of course, it cannot be forgotten that some of the large companies, such as, for example, BBVA, Santander or Telefónica, have been operating for several years. It is not surprising, therefore, that investors are very attentive to the evolution of the Bovespa and everything that happens in these decisive elections that take place in Argentina. Not surprisingly, there is a lot at stake these days.
Well, nothing less than a total of 22 companies of the selective Spanish stock market are represented in Brazil, with an estimated turnover of more than 20.000 million euros. Among them are Banco Santander, Telefónica, Iberdrola, Repsol, Endesa, ACS, Ferrovial, Acciona, Mapfre, Amadeus, Dia, Inditex, Indra, Meliá, Naturgy, Técnicas Reunidas, IAG, Viscofan, Siemens Gamesa, Enagas, Cie Automotive and Grifols. That is, some of the heavyweights of the Ibex 35 and in any case, many of the most important companies in the country. therefore, it is more than enough reason to look at Brazil these days.
Specific weight of the Brazilian economy
Brazil, the largest economy in Latin America (with 40% of GDP) and the most populated (192 million inhabitants) continues to evolve positively, despite the economic crisis that is still latent in its productive fabric. Therefore, Brazilian equities have shown a clearly bearish trend in recent years. With interannual decreases very close to 20%. To the point that a good part of the financial agents discouraged their clients from making their investments in this country.
Now, after the elections, it remains to be seen what the course that equities will take carioca or if everything will continue as until now. In any case, it will be necessary to be very aware of which economic plan the new president of the country will import. It will be a very objective signal of the direction that the stock market will take from now on. To determine if it is time to enter the stock market or on the contrary, you have to stay as before. That is to say, in positions of total liquidity to reduce unnecessary risks in the investment.
International emerging
Brazil is one of the great representatives of emerging economies around the world and its currency, the real, is followed day by day by international traders for its unusual volatility. With crosses that expose a very wide difference between their maximum and minimum prices. Where you can earn a lot of money, but for the same reason the risks are too high to lose much of the money invested. Especially for the changes made every day with the reference currency, which is the US dollar.
However, one of the great advantages of the Brazilian stock index, the Bovespa, is that it has a lot of bullish run when the trend changes. Its possibilities are enormous because it can revalue above other international stock indices, including the Spanish one. It is more than enough reason to value entering positions in this important financial market from these precise moments. Although evaluating the risks that these kinds of operations have.
Enter through mutual funds
In any case, a strategy to protect the interests of small and medium-sized investments is based on contracting investment funds. in equities based in this international square. There are many funds that are present in this American country and in this way you can choose between different ways of managing your money. Because you cannot forget at this time that this class of financial products combine several financial assets to protect the money of the participants. That is, you do not expose yourself directly to the Brazilian stock market as you would do with the purchase and sale of shares on the stock market.
In this way, you can combine your investments in Brazilian equities with other stock markets, both in the American area and within the old continent. This is what he calls diversifying investments instead of saving all your savings in the same investment basket. In addition, it has the advantage that you will not have to design the investment strategy. If not, on the contrary, it will be commissioned by a manager who has extensive experience in this type of operation in the equity markets. Beyond other technical considerations and until you can from the fundamental point of view.
Winks to Bolsonaro's position
So that you know how to channel your movements from now on, you will have no choice but to have some of the keys that the Brazilian financial market presents. One of the most relevant is that the business class and economic elites in Brazil are quietly encouraging far-right presidential candidate Jair Bolsonaro to win the presidential elections in Brazil definitively. Not surprisingly, one of the great fears of these important sectors is that a left government to the largest economy in Latin America.
This factor works in favor of equities in this country to rise sharply in the coming weeks and maybe even months. It is something that you can take advantage of to make the savings profitable in a way that is very satisfactory for your interests. Although limiting the risks with operations of not excessive amount. You just have to invest up to 20% of the capital available to make investments of these characteristics. On the other hand, it would be highly advisable to place a stop loss order in order to protect your positions on this very special exchange and what may happen in the coming weeks.
Another measure that you can apply is to choose companies that offer more security in their lines of business. Never resort to very aggressive models that can generate large depreciations in their prices. As you would do in operations in national markets. Without any kind of differences with respect to this important factor within the investment sector.