Investors must wait for Brazil election for fiscal clarity -Credit Suisse executive

By Paula Arend Laier

SAO PAULO, Sept 6 (Reuters) - Investors seeking clarity about the future of Brazil's fiscal policy from 2023 on must wait for the outcome of October's presidential election, said the chief investment officer of Credit Suisse CSGN.S for Latin America.

"You have to wait for the definition of who is going to implement the policies next year to, in fact, be able to understand what is the fiscal risk that lies ahead," Luciano Telo told Reuters, adding that the uncertainty may delay some investments in the country.

The market wants to understand if whoever emerges victorious will seek to contain the level of spending, Telo said in an interview.

Recent polls have shown former President Luiz Inacio Lula da Silva leading in the presidential race, followed by current President Jair Bolsonaro.

Once the election is decided, there may be some relief in the markets, Telo said. But he stressed the need for the new government to quickly work on communication with the financial industry after the result.

In some other Latin American countries, investors could not see a clear post-election guideline, making assets trade at a discount after the vote.

While Telo said the Brazilian stock market is currently cheap, the Credit Suisse executive prefers to wait for signs of the country's 2023 economic growth and fiscal policy before allocating more resources to equities in Brazil.

"We are very close to the election. To decrease an uncertainty, it's not worth it to hold more stock market long positions right now," he said, adding that bank stocks and commodity-linked companies are the ones Credit Suisse sees the most value in at the moment.

Any scenario for Brazilian financial assets hinges on the Federal Reserve's next steps, he noted.

"That is the most important thing to (determine) risk aversion than any regional element," Telo said.
Reporting by Paula Arend Laier; Writing by Peter Frontini; Editing by Bill Berkrot

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.