HALISTER1: Brazil Post-Impeachment Gains Rely on Reforms, Vote: Analysts

Brazil Post-Impeachment Gains Rely on Reforms, Vote: Analysts

(Bloomberg) -- While president Rousseff’s looming final impeachment is largely seen as positive by market participants, analysts diverge on the impact of such near-term factors as the vote’s score, fiscal reforms and Fed rates.
  • “While the impeachment has been widely anticipated, its impact has been positive for Brazilian assets,” Georgette Boele, a strategist at ABN Amro Bank, says in an e-mailed interview
    • “Fed expectations are now at the forefront”
  • If the impeachment is approved with less than 58 votes, it will be considered a negative sign for the approval of reforms in Congress, Luiz Eduardo Portella, treasurer at Modal Asset, says
  • NOTE: The minimum vote for definite Rousseff exit is 54
  • “It is important to see an end in this political novel,” no matter the score’s vote, Vladimir Caramaschi, chief- strategist at CZ Indosuez, says in a phone interview
  • Additional gains in BZ assets will depend on acting President Temer’s ability to address reforms, especially on the fiscal side, Nathan Blanche, partner-director at Tendencias Consultoria, says
    • U.S. Fed rates will impact BRL only in the case of a substantial hike, which is unlikely
  • Impeachment vote may bring ’’some euphoria, but small,’’ Markus Casal, trader at Ativa Corretora, says; the impeachment has been priced in
  • NOTE: Even as Rousseff’s impeachment may be fully priced in given the recent votes in the Senate, volume of potential inflows when the remainder of uncertainty is removed, is still hard to predict and may push the BRL to outperform over the short term; see chart
    • BRL testing upperbound of downtrend channel in place since Jan.
    • Positive sentiment tied to impeachment approval may keep currency in channel that has 3.20 and YTD high near 3.11 as intermediate key levels; lowerbound level currently beyond 3.00 psychological level
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Georgette Boele (ABN AMRO Group NV)
Dilma Rousseff (Federative Republic of Brazil)
Luiz Eduardo Portella (Banco Modal SA)
Markus Casal (Ativa SA CTCV)
Michel Temer (Federative Republic of Brazil)

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