IBOVESPA Up Over 11 Percent, Recovering to 80,000 Point Level

RIO DE JANEIRO, BRAZIL – IBOVESPA, the main Brazilian stock index, rose on Friday, March 13th, by more than 11 percent and returned to the 80,000 points level, on a rebound following the heavy losses the day before, in line with foreign stock markets.

In the morning, the rise was limited to two percent by rumors that President Jair Bolsonaro had been infected by the coronavirus, but the market soon gained ground when that information was denied by the President himself on his Facebook page. By 4:30 PM, the IBOVESPA was up 11.8 percent to 81,173 points.

Investors are looking for cheap stocks to buy after the stock market retreated 26 percent in a week. The commercial dollar, a reference in transactions between companies and banks, began the day down 0.451 percent, sold at R$4.7641. The tourism dollar, used by travelers, fell 0.6 percent, sold at R$4.96.

Around the world, after several panic days over concerns about the negative effects of the coronavirus pandemic on the economy, the climate was calmer yesterday. The European stock markets started the trading session up, and the American futures indexes also pointed to a start of trading with stock appreciation.

The announcement by the US Federal Reserve that it would pump US$5 trillion into the financial system to curb investors’ aversion to risk is helping to improve the mood in the markets.

The good news that cases of new infections in China, the epicenter of the pandemic, have dropped to less than 10 yesterday, also helped ease tension by indicating that the outbreak cycle has an end. In Brazil, the early release of the 13th month salary for retirees and speculation that the Severance Premium Reserve Fund (FGTS) could be released for workers cheered the market.

Despite the improved mood of investors, Pedro Galdi, an analyst at Mirae Asset, believes that this uptrend could be fleeting. “The evident panic could yet again interfere with investor mood to any moment,” he said in a report

Among the highest gaining stocks in the IBOVESPA yesterday was Lojas Americanas, which can benefit from a cash injection in the consumer market. The retailer’s shares rose 17 percent, to R$20.73. Magazine Luiza gained 14 percent, at R$38.70. The only decline in the trading session was from Vivo, which dropped 0.8 percent, to R$49.03.

In order to determine which shares are cheap, analysts primarily compare the dividend payment potential of a company, which reflects the projection of its future revenue, to the current price of its stock in the market.

The challenge in this case is to measure the impact of the epidemic on consumption and economic activity. Some sectors tend to suffer more than others, such as basic food products and medicines.