Brazil’s Ibovespa closed week down; interrupted 5-high streak

RIO DE JANEIRO, BRAZIL – The Ibovespa closed near the day’s lows, in another session marked by concerns over a war in Ukraine. Investors’ aversion to risk assets once again brought down Wall Street indexes and spread to the Brazilian stock market, which interrupted a cycle of 5 weekly highs.

At 112,879 points, Ibovespa closed Friday, February 18, down 0.57%, with a financial turnover of R$24.9 (US$4.8) billion. In the week, the index fell 0.6%. It should be noted that, until Thursday, the Brazilian stock market had been experiencing a streak of 7 bullish sessions, withstanding concerns over the Eastern European situation.

But tensions are becoming increasingly heated, with clashes between pro-Russian separatists within Ukrainian territory and diplomatic relations between the countries ever more strained.

According to Rodrigo Franchini, the risk factor impacts business, but the price factor is also starting to influence the Stock Exchange’s performance. “The price of Brazilian assets is still attractive, but not as much as it was when the index stood at 105,000 points,” he said.

He believes that the foreign flow in the Stock Exchange can continue, but says that investors will look more closely at the evaluation criteria for Brazilian assets. “There is naturally a repricing of the stock exchange and of the criteria for evaluating entry. And this leads to a reduction in flow, which adds to the current global risks,” Franchini said.

Ivest Consultoria investment specialist Juan Espinhel said the flow of foreign investment remains consistent, at about US$5 billion in February.

“The uncertainty is what brings about the correction in the markets, much more than bad news, in fact. It is the uncertainty that is difficult to price and what we saw this week was an adjustment of these uncertainties, because the week began with the expectation that tensions would be resolved,” he said.

Espinhel also pointed out that this is a hot season for corporate financial reports and these results ultimately interfere with prices.

Among the Ibovespa’s highest climbers, Cielo (CIEL3) soared ahead, rising 12.3%. The shares were boosted by the news of the sale of the company’s stake in Merchant e- Solutions, for up to US$290 million.

The index’s sharpest fall yesterday came from Rumo (RAIL3), which presented its fourth-quarter results. Despite strong volumes in the quarter, analysts highlighted margins impacted by the increase in fuel costs. RAIL3 dropped 8.81%.

The commercial dollar closed the day down 0.52%, at R$5.14 to bid and ask. The American currency fell for the 6th week in a row and has depreciated 7.8% in the year-to-date.

Futures interest rates fluctuated between losses and gains throughout the day and ended the extended session slightly down: DIF23, -0.02 pp, at 12.36%; DIF25, -0.06 pp, at 11.40%; DIF27, -0.04 pp, at 11.30%; DIF29, -0.01 pp, at 11.47%.

In New York, stock markets had a volatile session following mixed information about the situation on the Ukrainian border. The Dow Jones closed down 0.68%, at 34,079 points; the S&P 500 fell 0.71%, at 4,348 points; and the Nasdaq retreated 1.23%, at 13,548 points.