Vaccine Hopes Lure Global Investors to Battered Brazil Stocks

(Bloomberg) -- Foreign inflows into Brazilian equities are starting to pick up as progress on a coronavirus vaccine and Joe Biden’s U.S. election victory have boosted the appetite for risk assets.

Offshore investors poured about 4.5 billion reais ($830 million) into Brazilian stocks on Monday, the biggest net daily inflow since at least 2008, according to exchange data compiled by Bloomberg. Year to date, the figure is still negative at 77.1 billion reais, excluding inflows through equity offerings, as the country grapples with ongoing fiscal challenges.

The benchmark Ibovespa equity index pared its 2020 drop and hit the highest level since late July on Tuesday, as emerging stocks rallied, the U.S. dollar weakened and investors rotated into more discounted names. Both Brazilian and Latin American equities still lag their developing-nation peers this year.

“Monday’s a good example of momentum building in flows to EM equity,” said Morgan Harting, who oversees about $2.9 billion at Alliance Bernstein in New York. “This could extend for quite a while,” he added, pointing to high earnings growth expectations that have been supported by recent corporate results.

Last week, investors poured the most money into emerging-market exchange-traded funds in 10 months, as firms including UBS Wealth Management said a divided U.S. government could be positive for developing-nation equities amid expectations of a more dovish Federal Reserve.

“Latin American equities tend to perform well against the backdrop of recovery in global GDP, low global interest rates and a weak U.S. dollar,” said Ed Kuczma, who oversees BlackRock’s Latin American equity funds. These characteristics “are likely to persist into 2021.”

©2020 Bloomberg L.P.