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The last month with a negative balance of foreign capital at Exchange B3 was November 2021 — Foto: Divulgação
Amid a more challenging global context for risk assets, with uncertainties over the growth of the world’s main economies and volatility in commodity prices, foreign investors withdrew funds from the secondary market of the local stock exchange, in the spot segment, in April. The total deficit was R$7.67 billion, marking the first month in 2022 in which there was an outflow of funds. Before, the last month with a negative balance of foreign capital at Exchange B3 was November 2021.
The April scenario is the opposite to that observed during the first three months of the year. In January, foreign investors invested R$23.39 billion, followed by R$20.58 billion in February and R$ 21.35 billion in March.
With the support of international investors, benchmark stock index Ibovespa had an expressive rally and, on April 1st, reached its record level for the year, ending the trading session at 121,570 points, a 16% appreciation in local currency. In April, when the external flow showed a reversal, the performance of local stocks was the opposite: Ibovespa dropped 10.10%.
In this sense, market professionals have adopted distinct visions about the possibility of the outflow continuing in the coming months. While there is caution among players with the monetary tightening scenario and slowdown in global growth, there is also the reading that Brazil is a relative winner in this scenario.
“We still see Brazil as a relative winner and remain ‘overweight’,” says Bank of America’s (BofA) Latin America equity strategy team, composed by David Beker, Paula Andrea Soto, and Carlos Peyrelongue.
“Even though the foreign flow to Brazil’s local stock exchange was slightly negative in April (there were outflows of R$7.67 billion in April, but the balance is positive at almost R$58 billion year-to-date in equities), Brazilian commodities are expected to continue benefiting from global dynamics and the weaker real supports exporters,” say the professionals. Still, according to them, the activity data in Brazil is improving and interest rates may peak soon.
In its monthly allocation strategy report, BTG Pactual’s macroeconomics and strategy team says it is constructive on local equities, a view based on the thesis that there are companies that will benefit from a resilient commodities price environment, as well as those that perform better than Ibovespa in high interest rate (financial) environments, and those more exposed to high income consumption.
The strategists, however, highlight four pillars to evaluate the current market prospects: macroeconomic scenario, corporate earnings, fundamentals and valuations, and flow. The first three topics, according to them, inspire optimism for the stock market, with flow being the only one that demands more caution.
“After a great first quarter of foreign inflows into our stock market, April was marked by a negative flow reading, reflecting a volatile commodity and market environment, in general,” the professionals state. They point out that local funds also continue to contribute negatively to this equation, as a result of the redemption dynamics that the industry continues to experience.
Also according to B3 data, institutional investors withdrew R$2.446 billion from the secondary market in April, increasing the annual deficit to R$63.519 billion.
“We understand that this vector is still not expected to improve in May due to the market context and, consequently, demands greater caution,” point out the BTG’s professionals.
B3 also informed that in April individual investors were net buyers in the secondary spot market, with a positive balance of R$4.972 billion.
Source: Valor International