Companies listed on the B3 (São Paulo Stock Exchange) appreciated US$73.6 billion from Friday, Sep. 30, to Monday, Oct. 3.
They were valued at US$786.5 billion and rose to US$860.1 billion.
The growth in market value is due to the result of the first round of the 2022 elections. Luiz Inácio Lula da Silva (Workers’ Party – PT, left) and Jair Bolsonaro (Liberal Party – PL, right) will face each other in the runoff.
However, Bolsonaro’s strong showing in the polls may indicate that the current president could prevail over the PT on Oct. 30, 2022, although everything is still uncertain.
Brazil’s stock market had its highest rally since April 6, 2020, when it rose 6.52% as investors speculated on the impacts of the covid-19 pandemic on the economy.
This sharp rise in the stock on B3 is equivalent to the following:
- Brazil Aid of R$600 (US$117) – an annual cost of R$157.7 billion. That is, the US$73.6 billion transformed into reais would serve to pay this benefit for two years and four months;
- Rapporteur’s amendments – the so-called “secret budget”, which is not secret, is equivalent to R$19.4 billion in 2023. The money from Friday’s B3 valuation would be enough to pay for 19 and a half years of this binge of congress members and senators.
The index closed at 116,134 points, up 5.54%. This level has not been reached since April 14, 2022.
The bullish overseas markets also contributed to the improved performance of the Stock Exchange on Monday.
Besides the appreciation of assets, companies became more expensive because of the real appreciation against the dollar.
The price of the North American currency fell 4.09%, from R$5.40 to R$5.17. It was the largest drop since June 2018.
MARKET CANDIDATE
Lula da Silva is not the financial market’s favorite candidate. Jair Bolsonaro going to the 2nd round and, more importantly, the competitiveness of the current president compared to the former president is seen as a good sign for investments.
The understanding is that a second term for Bolsonaro would represent the advancement of liberal privatization agendas and other reforms to reduce the size of the State in the economy.
Besides the possibility of upsetting the PL candidate, forming the Chamber of Deputies with more right-wing names would require a possible Lula administration to be more centrist and governable. It is a sign that more reforms could be approved.
Now, economic analysts focus on understanding how the campaign will be in the second round.
If the election has many promises to increase spending that are not in the budget, there may be a greater risk to asset prices. In other words, this short-term good mood in the market may fade.
Otherwise, the upward trend continues.
With information from Poder360