Brazilian stock market surges, but doubts persist.

Brazilian stock market sees biggest gain in 28 years.

The Brazilian Stock Exchange registered this Tuesday (11) the largest sequence of gains in reais since 1997, with an accumulated appreciation of 29% in the year and almost 50% in dollars. The Ibovespa renewed records, driven by external flow and optimism with economic reforms.

Detachment from the fundamentals

Despite the performance, experts warn that the increase is disconnected from the country's fundamentals. Brazil still faces high interest rates, persistent inflation, and political uncertainties. The IPCA (Consumer Price Index) for October was 0.09%, the lowest rate for the month in 27 years, but the accumulated rate over 12 months remains at 4.68%.

Investor positions

• Local fund managers are divided: some see room for further gains, while others, like UBS, recommend focusing on technology in the US and Asia.
• Foreign investors account for the majority of recent inflows, which increases the risk of a correction should the global scenario change.

Foreign trade booming

Up to the first week of November, Brazilian trade reached US$540.8 billion, with a surplus of US$1.811 billion for the week. Agribusiness led exports, with an increase of 42.21% in the daily average, while the extractive industry fell by 22.71%.

Impacts for businesses and consumers

• Technology and agribusiness companies are benefiting from the optimism, but the industrial sector faces challenges with the drop in commodity exports.
• Consumers are relieved by the slowdown in inflation, but still face pressure on fuel and energy prices.

Photo by Darwin Boaventura on Unsplash