Bovespa Has Worst Semester Since 2008

By Maria Lopez Conde, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Brazil’s stock exchange, the Bovespa, suffered a 22 percent loss in the first six months of this year, making it its worst semester since the financial crisis struck global markets almost five years ago. The Bovespa recorded a devaluation of over eleven percent in June alone.

Last month, the stock exchange closed at 47.457, consolidating an 11.3 percent devaluation and the index’s most lackluster performance in over a year.

This semester’s result was only a little better than the Bovespa’s worst drop of 42 percent that resulted from the American economy’s freefall in the wake of Lehman Brothers’ bankruptcy and the collapse of the housing bubble in September 2008.

Experts believe both the deteriorating health of the Brazilian economy – evidenced by rising inflation, falling value of Brazil’s currency and decreasing exports – as well as the American economy’s recovery played a role in Bovespa’s uninspiring performance.

Signs that the U.S. Federal Reserve might end stimulus and easy money policies set in place during the financial crisis have also driven money away from Brazilian stock.

“That diminished the flow from emerging markets and that should continue in the coming months,” said Walter Mendes, partner at Cultinvest Asset Management, in an interview with Reuters. “What we will discover is the intensity at which [the drive away] will happen,” Mendes told the agency.

According to the same outlet, market analysts believe prices and values are not expected to fall further, as the values are already reflecting a slew of negative financial data on Brazil’s economy and the United States’ recovery.

In late May, IBGE data revealed the country’s GDP had only risen by 0.6 percent in the first quarter. In June, government data showed consumer prices had continued to climb upward, exceeding the Central Bank’s expectations. This week, Brazil recorded a US$3 billion trade deficit, its worst result since 1995, according to the Ministry of Development.

Driving Bovespa’s downwards slump are, partly, the so-called “X Companies,” controlled by the former billionaire, Eike Batista. OSX, the shipyard and shipbuilding company, LLX, his logistics firm, as well as the mining-focused MMX and oil and gas arm, OGX, have all registered big losses in the market.

For one, OGX’s shares have tumbled 83 percent since early January. In fact, OGX is the public company that has seen the biggest losses this semester, according to Economatica statistics that compare the performance of 320 Brazilian companies. The oil and gas giant suffered a R$798.7 million loss between January and March 2013.

Although the Bovespa‘s losses might keep some risk-averse investors away from the stock market, some analysts affirm that this is the right time for bold investors to make a move. Amerson Magalhães, investments expert and director of Easynvest, a São Paulo-based brokerage firm, told the Diário Comércio e Indústria e Serviços (DCI) that he agrees with that assessment.

“Today, you have purchase opportunities that are very interesting. Shares from good companies have fallen quite a bit,” Magalhães said, adding that investors must understand that new losses might be posted before shares rise again.

According to Rossano Oltramari, from XP Investimentos, Bovespa’s conditions can benefit those who are willing to wait for their shares to pay off. “You need to have long- or medium-term vision,” affirmed Oltramari, explaining that it all depends on the investor’s appetite for risk. “If the profile is conservative, it’s better to wait a little and stay put,” Oltramari told DCI.