Brazilian Stocks Upgraded by BofAML on Clearer Political Picture

(Bloomberg) -- Bank of America Merrill Lynch bumped Brazilian equities to overweight from neutral after Jair Bolsonaro’s commanding lead in the first round of the country’s presidential election.

The bank cited the easing of political uncertainty and discounted valuations.

"While the final outcome will only be decided in three weeks, we believe the market will view reduced uncertainty positively," BofAML strategists wrote in a note. "Since 1989, the winner of the first round has been victorious in 5 out of the 5 presidential elections."

The Ibovespa benchmark index was up 9.6 percent over the past month before today.

"Despite the markets movements in the past couple weeks, we still see room for more upside," they said.

BofAML added Cia Energetica de Minas Gerais, Gol Linhas Aereas Inteligentes SA, CVC Brasil Operadora e Agencia de Viagens SA, Magazine Luiza SA and Banco Santander Brazil SA to its portfolio, while increasing exposure to Banco do Brasil SA, B3 SA and Petroleo Brasileiro SA. Klabin SA, Tim, Ambev SA, Energisa, JBS SA and Gerdau SA were removed.

The bank cut Mexico to neutral on few catalysts for the stock market and stretched positioning. Stocks in Peru and Colombia were maintained at neutral, while Chilean stocks were kept with an underweight recommendation.

To contact the reporter on this story: Vinícius Andrade in São Paulo at vandrade3@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Christiana Sciaudone

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