RIO DE JANEIRO, BRAZIL – After a decade stationed around 500,000 individual investors, the Brazilian Stock Exchange surpassed one million CPF (Individual Tax ID)-holding investors in July 2019. Since then, the number has continued to grow and now, during the quarantine imposed by the novel coronavirus, the trend has gained further momentum: from March to July 2020, 900,000 new trading accounts were opened, raising the total to nearly three million investors.
Brazilian residents’ access to the B3 managed to offset part of the R$45 billion withdrawn by foreigners in the capital market during the pandemic. It was also the local investors who helped halt the drain of publicly traded companies during the first months of the crisis and led the IBOVESPA index back to over 100,000 points, after it had lost 60 percent of its value between March and April.
The main driver for the avalanche of new CPFs, according to brokers, managers and the Exchange itself, was the drop in the Treasury’s basic interest rate. At its lowest level in history, two percent per year, the SELIC rate toppled the profitability of traditional fixed-income investments, prompting Brazilians to take risks in the search for higher returns. But there is also a change in the investors’ profile, which is increasingly young, with long-term goals and largely encouraged by closed groups on social networks and by digital influencers, who focus their activities mainly on Twitter and YouTube.
New face
According to B3 data, since 2016 individual investors have increased their trading session share from 17 to 21 percent, while foreign investors have reduced theirs by ten percentage points in the same period, to 46 percent today. The remainder is made up of institutional investors, such as pension funds.
Currently, six out of every ten CPFs on the Exchange are aged between 16 and 45, compared to 21 percent four years ago. This age bracket now represents almost a quarter (R$100 billion) of the R$382 billion traded on the B3, six times higher than the amount handled by individuals in 2016.
Many are newcomers, not only to the stock market, but also to any investments. One such is César Lauria, a 25-year-old IT analyst from São Paulo, who until the start of the pandemic, was not even in the habit of saving money. When he locked himself up at home, due to social isolation, he found time to research how to better manage his finances, and set up an investment plan.
Over the past few months he has been setting aside 30 percent of his salary to invest in stocks. “I realized I could save money and started to follow some influencers on the internet to get tips,” he says. “I already have over R$10,000 invested in the stock market,” he says, adding that he had no difficulty in placing purchase and sale orders through the brokerage house’s website and is not considering reserving a portion of the money for more conservative fixed-income options.
Social networks
Just like Lauria, the 30-year-old software engineer Isadora Maceió began investing in the stock market only recently. “I’ve had problems with debt. Five years ago I canceled my credit card and I’ve been organizing myself. I read a lot in the press and I followed YouTubers who talk about finances, until, in April, I made my first direct stock purchases.”
The engineer says she intends to set aside 15 percent of her salary in a basket of diversified products, which include stocks, stock funds and some conservative products, such as Real Estate Credit Bills (LCI) and Agricultural Credit Bills (LCA). “I haven’t had the courage to set up a home broker to be able to operate day trade, but I’m learning about it,” she says.
Orphans
For Itaú’s investment director, Cláudio Sanches, the string of cuts in the SELIC has been creating orphans of CDBs (Certificate of Deposit) and DI (Interbank Deposit) funds, which increases the presence of shareholders in multimarket funds, stock funds and in the direct purchase of securities from companies.
“The client profile that is now joining the stock market is younger and clearly not the most radical, who likes to keep buying and selling stocks or operating day trade. They are also less knowledgeable in investments, but understand that variable income is an attractive option,” he says.
Responsible for restructuring the stock market in the early 2000s, economist José Roberto Mendonça de Barros, of MB Associates, sees the emergence of new investors as positive. “I can’t see that as a problem. It’s actually what the Exchange is there for,” he says.
However, the economist wonders about the real chances of an investors’ flight in the short and medium term, in the wake of Brazil’s low growth expectations this year and the next. “These over two million investors who have recently joined, have not yet been tested. There was a downturn (in the stock market) in March and April, but it quickly rebounded to 100,000 points. The test, whether the investors will stay or leave, comes now, as of September, with the start of discussions on the federal government’s budget for 2021,” he says.
“The stock market doesn’t grow without improvement in the Gross Domestic Product and with a government that blows up spending. And every time the stock market undergoes a strong correction, it’s the individual investor who pays the bill,” Mendonça de Barros says.
Social media create a space for finance gurus
Four months ago, engineer Henrique Bredda’s profile became the spotlight of FinTwit, an informal name for the financial market community active on social media.
With 170,000 followers, he has established himself as a kind of online guru among Faria Lima Avenue investors. But in March and April, the funds administered by his manager, Alaska, with R$10 billion in assets, fell by 70 percent, and Bredda’s effort was to dispel rumors that he would break.
“Those who always followed me on Twitter already knew about my beliefs and my investment strategy. In fact, I use Twitter to do just that, to clearly state what I think and for no one ever to be caught off-guard with downturns like the one that occurred,” says the manager, who since 2018 has maintained the profile with daily posts – where, as well as talking about investments, he comments on economic scenarios.
FinTwit, or #FinTwit, is derived from the initials of Financial Twitter, a US-born initiative that, also here in Brazil, has been growing in popularity since 2018 and is rising with the number of new investors on the Exchange.
There is barely any room for other subjects there other than stocks and products from the capital market. “No one talks about fixed income on Twitter,” says Roberto Indech, chief strategist at Clear Brokerage, XP Investments’ arm for the equity market.
What was born as a niche, a club between managers and analysts, currently also attracts people who are starting to take their first steps in the financial market.
Management student Yan Rodrigues, 25, has been using Twitter since the Central Bank began the cycle of dropping interest rates – last July, when the SELIC stood at 6.5 percent per year. “I like to follow video links and research a lot of material. I particularly like a professor who has a great deal of stock market experience and is terrific. He made me understand the financial market and learn to look at the right indicators,” he says.
For ESPM’s digital channel professor, Alexandre Bessa, the investors’ community preference for Twitter is based on the social media’s speed, which is based on concise and direct messages – such as the professional traders’ share purchase and sale orders. “It works almost like a network with news headlines for decision making,” he says.
According to an internal study by the social media, there were 2.6 million posts on Brazilian-related finances between January and April this year alone, an 84 percent increase over the same period in 2019. Among the platform’s users in the country, 20 percent have investments in securities or shares.
Videos
In addition to Twitter, the advisory and financial education business for young investor apprentices has also proved efficient and profitable on YouTube. Fund managers like Novus Capital, or brokers like Necton, have invested in the video network to establish their brands among new investors.
Despite not enjoying the influencer label, Luiz Eduardo Portela, from Novus, releases weekly videos talking about investments and financial education. André Perfeito, Necton’s chief economist, conducts live streams almost daily, interviewing politicians with leadership positions and members of the federal government’s economic team.
“Our manager was born digital to address this new audience,” Portela says. Yet the one leading the list of influencers on YouTube is not an economist, but rather entrepreneur Nathalia Arcuri, of the Me Poupe Channel. The former journalist, with 5.3 million followers and a turnover of R$20 million in 2019, gives personal finance tips.
This year, she projects R$45 million in revenue, money that will be increased by the recent demand for investment courses. “We already have courses on financial independence and now, with the search to understand stocks, we’re going to do a variable income course,” she says. The courses are recorded and cost approximately R$2,000.
The CVM monitors the actions of influencers
The explosion of influencers in internet finance, from inside and outside the capital market, has attracted the attention of the Securities and Exchange Commission (CVM) and the Federal Prosecutor’s Office (MPF). The bodies are investigating practices that range from potential crimes of price manipulation to the irregular exercise of the activity of stock analysis by some profiles.
“The CVM and the MPF have implemented filters that collect social media data to investigate people who use their position with the audience for unauthorized practices, such as market manipulation. We may not have yet spotted any very eventful cases, but it’s happening,” says Marcelo Trindade, attorney and the CVM’s former president.
Price manipulation cases may occur when an influential person recommends the purchase and sale of a certain share with the purpose of profiting from the operation himself.
“There’s a lot of good things, now there’s also a lot of dubious things, with people recommending shares with no credentials for that,” says Bernardo Pascowitch, owner of Yubb investment search engine.
“People want investment recommendations, but I’ve always been careful to discuss financial education, which is something else,” says Natália Arcuri of the Me Poupe Channel.
“I get tips from friends and on the web”
Five years ago, software engineer Isadora Maceió was in debt, mainly due to excessive use of credit card purchases. Since then, she canceled the card and started saving money to make cash purchases. Late last year, already out of debt, she began saving money. Until at the start of quarantine, she began to look into investing the amount she kept in her savings account. “I get many tips from my economist and banking friends and I followed some profiles that I identified myself with on YouTube. That’s how I define the investments I’m going to make and the stocks I’m going to buy.”
“I bought R$2,000 in shares”
The consecutive drops in the SELIC rate were decisive for Pietro Corletto, 23, to start investing in the Stock Exchange. An economics student at the Federal University of Rio Grande do Sul (UFRGS), he used to invest in CDBs and Tesouro Direto (Brazilian National Treasury system), but began to study variable income and to talk to friends with practical experience in the area. He looked for an investment brokerage and started with R$2,000. “I invested little, but for me, it’s a lot of money,” he says. For security, the student still keeps a fixed income reserve invested in the Tesouro Direto.
“I paid off my family’s debts at a profit”
Administration student Yan Rodrigues joined the capital market motivated by the cycle of a declining basic interest rate, the SELIC. At first, he ventured into day trade techniques, but gave up after a few months because he lost more money than he had expected, approximately R$2,000.
“Like everyone else, I first started earning, but then I realized that I was losing more than I could and that I didn’t have enough knowledge”. With the income from his investments, he tries to help his family. “I’ve already managed to pay off my family’s debts related to phone bills, property financing and IPTU (Urban Property Tax).”
“I’m a Twitter addict”
A civil engineer, Sérgio Schreirer follows social media and investment analyst profiles to understand the market and choose which operations he will undertake on the Stock Exchange. “I’m addicted to Twitter. I use the network to keep me updated at all times,” he says, adding that he likes day trade operations, but recommends caution with influencers.
“We’re in a market where someone is the investment guru, who says they get it right, but we’ll never have consensus. I try to get information from social media to help me, not to live by what they write there.”
“I don’t want to leave the money sitting there”
Law student João Paulo Pujol, 23, bought shares in the Stock Exchange about a month ago. “I studied about it and realized that, after a while, the variable income is better than the fixed income. I can’t just leave the money sitting there,” he says.
He bought a course on the subject and also watched free videos. “I have to admit that I regretted buying the course because the content was so much like YouTube.” To choose the most appropriate investments for his goals, he analyzed some of the companies. “I read the long-term quote chart and also considered dividends,” he says.
Source: O Estado de S. Paulo