investors from Brazil to celebrate them is two of Sunday’s presidential election could be a sign of how much the euphoria will last Wednesday.
It is the day in which Datafolha will release its next survey on the intention of the voters prior to the runoff election on October 28 between Fernando Haddad and Jair Bolsonaro. While Haddad, of the leftist workers party, had led the tight race in previous surveys, the right-winger Bolsonaro has gained momentum in recent weeks.
Any survey showing that Bolsonaro wins a big advantage would be positive for the markets. Investors pushed upward actions, the real and the bonds on Monday once the former army captain obtained a result higher than expected in the first round. Operators considered that he could revive the economy of Brazil after suffering the worst recession in a century, and fear a return of the workers party, which they blame for policies that cost him the rating of investment grade of the country.
Although Bolsonaro seems to have more energy behind his candidacy, a victory for Haddad is still a possibility that investors should take seriously, according to Bertrand Delgado, strategist of Société Générale, who predicts that volatility will remain high during the rest of the month. «It is too early to dismiss Haddad», Delgado wrote in a report on Monday. «The presidential race promises to be tight.»
The Ibovespa stock index entered a bull market Monday climbing 4.6 percent to register its biggest advance in more than two years, while the rise of almost 2 per cent real left him in a maximum of two months. The election results showed that Bolsonaro obtained 46 percent of support in the first round, below the majority needed to achieve a direct victory, but overcoming the surveys, and very over 29.3 per cent of Haddad.
Bolsonaro has not delivered many specific details about its economic program, even when analysts call for measures to shore up the budget, such as the reform of the national pension system. Investors have been encouraged by the comments of his economic adviser, who often makes statements in favor of privatizing State-owned companies and other similar policies.
«It is likely that hold a boost in the sense that Brazil should outperform the rest of the emerging markets,» said Jim Barrineau, Chief of debt of emerging markets for Schroders in New York. «His economic adviser is extremely friendly to the market, but the Brazilian governance in general is difficult given the nature historically fragmented Congress».
The impressive vote by Bolsonaro is prompting some investors to nearly ruled out the risk of a return of the left to power. Citigroup expects that the Brazilian real will rise to 3.55 to the dollar after the second round. JPMorgan raised the currency and local rates to overweight and said he sees value in all Brazilian shares. Bank of America also raised the actions of Brazil on Monday.
Others are not so sure and warn of a setback if Haddad moves in the polls prior to the second round of the 28th of October. It was reported that the former Mayor of Sao Paulo would be in conversations with some of the other candidates who did not obtain a good result in the first round to form alliances and win support in this way. Haddad has criticized the limit of expenditure adopted by the current administration, associating himself with the comments that have worried investors about the fiscal trajectory of Brazil.