HALISTER1: Brazil Outperforms, But May Also See Delayed Reaction: Analysts

Brazil Outperforms, But May Also See Delayed Reaction: Analysts

(Bloomberg) -- While early impact of Brexit on Brazil assets such as BRL has been smaller compared to EM peers, total reaction will depends on further developments on Europe and globally, analysts say.
  • NOTE: BRL -0.9% vs USD as ZAR drops 3.40%, MXN -2.9%
  • Brazil’s direct links, in trade and investments, with U.K. are small relative to others, but the impact on global risk may hurt high-yielding currencies by “varying degrees”, Mike Moran, head of economic research for the Americas at Standard Chartered says in an e-mailed interview
    • “The market is still digesting the implications of this Brexit vote and the focus naturally has been more European-centric so far; it may take some time before the implications for Brazil are digested”
  • Biggest risk for markets is if other countries follow U.K. example and decide to leave the EU, Pablo Spyer, director at Mirae Asset Wealth Management, says in a phone interview
    • Positive development for BRL and other EM markets is the deep decrease of bets on U.S. rate hikes
    • “The markets scrapped the bets on hikes this year and maybe we won’t see any hike in the next 12 months”
    • While recent wins of acting president Temer on votes in Congress adds to BRL’s resilience, eco.-political backdrop is still not totally stabilized, Spyer says
  • NOTE: Only 1,5% of all Brazil exports go to U.K.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Michel Temer (Federative Republic of Brazil)
Mike Moran (Standard Chartered PLC)
Pablo Spyer (Mirae Asset Global Investments)

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