Brazilian Equity Woes Temporary: Citi’s Press

Bovespa has lost 16% on the year through Tuesday and many companies’ new issuance plans have been scrapped, but there are still reasons to be constructive about Brazil’s equity outlook, says Citi LatAm strategist Jason Press. He says that the Bovespa has only seen a 12% peak-to-trough drop and Citi reckons from current levels the market will provide 25% returns by year’s end. The US bank has a preference for companies tied to interest-rate sensitive sectors that have suffered but should recover once Brazilian government policies become clearer and worries about the US and Europe subside. These include banks, low-income homebuilders, and certain consumer names, including AmBev. Press called the recent postponed transactions in Brazil a “temporary problem.” New issuance should follow a pickup in the equity market. “In Latin America, there has been an average of $7bn-$8bn in new equity issuance per quarter during the last 18 months, and we see no reason to suspect the market would slow from that,” he says. Press spoke on a panel and on the sidelines of a Brazilian-American Chamber of Commerce event Tuesday in New York.