Brazilian markets turnaround?

Hot girls attract hot money!!!


1. Recent facts

- 27 firms made their debut on the Sao Paulo exchange,Bovespa, in the first half of the year, surpassing the total number of floats in the whole of 2006. And they keep coming!!!

2. Reasons for turnaround

- Interest rate keeps going down

- Improve corporate governance

- Country financial improved by good housekeeping and the commodities boom

- High interest rate given Brazil a fixed-income culture. Decreased in interest rate makes Brazilian pension funds increase the exposure to equities (16% now)

3. Sustainable?

- recent IPOs have to sign up so-called novo mercado guidelines, which do away with the dual shares classes, over-friendly board members and non-existent protection for minority shareholders

- Brazil's sovereign debt may upgrade to investment grade in the next 18 months

4. Risks

- lots of good companies come to the market, but some bad companies too

- Brazil is more open than many emerging markets and so more vulnerable to hot money (some 70% of the money for the IPOs has come from foreign investors)

Conclusion: Warren Buffet has been buying the Brazilian currency....

Source:"Economists" article "the view from cloud nine"