Brazilian Stock Market Records World’s Worst Performance in Coronavirus Crisis

RIO DE JANEIRO, BRAZIL – The Brazilian stock market has suffered the worst negative impact with coronavirus among the world’s markets, recording a 52 percent drop in dollars compared to January, according to a survey conducted by the US bank Goldman Sachs.

This is the worst bear market, which is defined as a drop of over 20 percent, for the stock market since the 2008 global financial crisis.

In addition, the Brazilian real was the fourth most depreciated currency in the period, with a devaluation of 22 percent, and is currently quoted above R$5. The depreciation is only no larger than that of the Mexican peso, the Russian ruble and the Norwegian krone.

However, analysts Ron Gray and Caesar Maasry point out in their report: “We are still intensely focused on global downside risks, but for long-term investors who are looking for valuation, the stock and currency moves in Brazil seem excessive”.

With the severity of the recent sell-off, Brazilian stock valuations have shifted from the most overvalued portion of the emerging countries to below the historical average. It should be noted that analysts use MSCI Brazil as a reference.

However, they consider: “for the long term investor, we have discussed assessment metrics further ahead for Brazil as well as valuations. But for the tactical investor, we note that not only is calculating the market bottom extremely difficult, but the costs of being “too early” [to determine it] may be very painful”.

They assess that this downturn in Brazilian assets was much stronger than the downturn seen in much of the Asian market since then.

Among the largest drops after Brazil, are the stock markets of Indonesia (drop of almost 50 percent), South Africa (depreciation of about 45 percent), Russia (drop of about 45 percent) and Chile (drop of about 40 percent).

Analysts emphasize the change in the variable income market in Brazil, amid the scenario of a greater decrease in interest rates. By adjusting, the assessment is that Brazilian stocks are currently cheaper than in the financial crisis, but with a higher valuation than 2016.