Brazilian Market Plunge Draws Bargain Hunters? Wall Street Split on Direction

Odaily reports: Brazilian President Lula's re-election result caught investors off guard. Brazilian markets suffered a sharp selloff at one point, with the real falling about 8% against the US dollar, the largest single-day drop in more than 20 years. However, after the market plunge, Wall Street institutions have diverged in their attitudes toward Brazilian assets: Citigroup closed out bullish positions, Morgan Stanley downgraded Brazilian equities, and JPMorgan also cut its allocation recommendation for the real and local-currency rates; but Wells Fargo believes the market reaction was overdone and recommends buying the real on dips, while GQG Partners is also preparing to buy after the market panic.

Some investors believe the pullback in Brazilian asset prices has created investment opportunities, but fiscal risks are still weighing on the market, and investors are waiting for the Lula government to announce its economic team and fiscal plan to judge whether it can push forward fiscal adjustment. Although the real rebounded for two consecutive trading days after the plunge, Brazilian equities continued to fall, and the market has not yet formed a clear reversal signal. (Bloomberg)