Category: Equity

Foreign investors pulled a net $1.74bn out of Brazil’s Bovespa in July, according to the exchange. This is the biggest net reduction this year and coincides with global equity volatility. International investors bought $18.22bn equivalent in the month but sold $19.96bn equivalent in Brazilian stocks. The Bovespa saw average daily turnover of $2.6bn and international investors were the biggest single traders, with 35.52% of the monthly volume. In July, the Bovespa’s market cap reached $1.13trn.

MercadoLibre, the Argentine computers and electronics firm, has a $273.3m-$314.3m IPO lined up for Thursday via JPMorgan and Merrill Lynch, according to Dealogic. The initial range is $16-$18 on the SEC-registered deal. The issuer is an online auction and trading platform.

Corpbanca, the Chilean financial institution, has priced a $72.5m equivalent offer of domestic 5-year bonds at 3.20%, or 62bp over the corresponding government issue. The bonds were sold on the Santiago Stock Exchange and proceeds are to improve the balance sheet structure. The bullet is due July 1 2012. Corpbanca Asesorias Financieras structured the deal. It is denominated in Chilean inflation-linked units, or UF.

MercadoLibre, the Argentine computers and electronics firm, is lining up a $273.3m-$314.3m IPO via JPMorgan and Merrill Lynch, according to Dealogic. The initial range is $16-$18 on the SEC-registered deal. The issuer is an online auction and trading platform.

LatAm debt and equity markets have rebounded in tandem with global stocks and the mood is brighter after the storm. The Bovespa gained 3.12% to 54,572 while Mexico’s Bolsa rose 2.20% in Monday’s relief rally. Analysts saw the dip as a buying opportunity after months of overstretched valuations. “Fortunately, dedicated investors are stepping into the fray, buying up assets across the board,” says BCP, which is bullish overall on the commodity producer story. “Although there are concerns about the ongoing crisis, there has been no evidence of divestitures by dedicated accounts. We continue to see enormous value in the asset class, with unique buying opportunities in Argentine assets and local currency products,” it adds. However, Merrill Lynch for one sees more bloodletting in LatAm equity, and describes Brazil as a crowded trade. “We expect more downside. Technicals [and] sentiment suggest [it is] too soon to call the lows. Markets may be forced to re-price global growth lower,” says Merrill in a note on EM equity in general. After the correction, there was bound to be some short covering following a bearish overshoot. More downswings look likely short term and this week is heavy on US data releases that will keep participants nervous. Investors should remain cautious until the storm has fully passed. Companies and governments looking to price deals will likely have to wait.

LatAm equity markets continued mixed Friday, with the Bovespa down 1.8% but the Mexican bolsa rebounding modestly. Citi estimates that MSCI Latin America fell by 5.9% in dollar terms Thursday, the third worst one-day decline since immediately after the 9/11 terrorist attacks in 2001, but not as bad as February 27, when it declined 6.7%. “Crucially, as earlier this year, this latest meltdown has had nothing to do with events in Latin America itself,” says Citi, which has long been calling for a correction while maintaining that longer term, conditions are bullish. “This correction will play out similar to all of the earlier corrections in this bull market; we do not believe it is the start of a new bear market,” says Citi. “If current events do not pull the US economy into recession or cause the global economy to slow sharply, the current correction will simply create a new buying opportunity for Latin American stocks,” it adds. Citi tips the following defensive stocks for high dividend yields and low volatility: CTEEP, Eletropaulo, AES Tietê, Cemig, Entel, Ultrapar, Cemex, Natura, Bradesco, Embraer, AmBev, Grupo Televisa, Datasul, Copasa, Tele Norte Leste, Industrias Bachoco, Gruma and Walmex.

The Brazil unit of Arab Banking Corporation (ABC Brasil) has become one of only a few foreign-controlled companies to raise funds via an IPO on the Bovespa. It picked up BRL609m ($330m) from the sale of 45.1m preferred shares, with 44.4m via a primary offering and 700,000 through a secondary offer priced at BRL13.50 per share, in line with the bank’s initial guide of between BRL11.50 and BRL15.50. UBS led. ABC follows Banco Patagonia of Argentina, which last week listed its shares on the Bovespa. Its IPO earned the company BRL483.8m (US$260m).

Banrisul, the Brazilian bank, has priced a $1.13bn equivalent IPO, in line with expectations. The bank sold 174m shares at BRL12 a share, versus a proposed range of BRL10.50-BRL13.50. The offering was through Credit Suisse and UBS-Pactual. Also Tuesday, an offering from Estacio Participações was scheduled to raise around $400m. Sole lead manager UBS-Pactual had announced a range of BRL32.50-BRL42.50.

IPO activity is churning over in Brazil, but Citi for one is not worried about indigestion. “There is little evidence that new issuance activity in the Brazilian equity market has created too much supply. On average, investors in new issues have seen gains of 40% over the lives of the new issues, compared to a gain in the Bovespa of “only” 25% over the same period,” says Citi in a report issued Tuesday. It adds that besides July issues, just two IPOs of the past year are below issue price. In the past 12 months, Brazilian companies have raised $18.6bn in 54 deals and Citi says the pace is accelerating. Flow is still dominated by real estate and construction, accounting for 21 of the 54 deals in the past year, raising $6.3bn. “IPO performance in the Real Estate/Construction sector has improved markedly. On average, these new issues have risen 47% in the past year, a 21% outperformance of the Bovespa,” says Citi. The best performers by sector have been Mining and Telecoms, with only one issue each. The only sector where IPOs have underperformed is renewable energy. The note was presumably written before the Bovespa took a beating Tuesday, closing down 3.86% at 55,794.

IPOs from two mid-cap banks and an educational company were expected to hit the market early this week in Brazil. Banco ABC is expected to bring a $365m IPO via UBS-Pactual and Itaú BBA Tuesday, according to Dealogic. The price range was BRL11.50-BRL15.50. Banrisul is also expected to bring as early as today an estimated $1bn offering via Credit Suisse and UBS-Pactual at a proposed range of BRL10.50-BRL13.50. Also Tuesday, an offering from Estacio Participações is expected to raise around $400m. Sole lead manager UBS-Pactual has announced a range of BRL32.50-BRL42.50.