Brazilian Financial Market

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An overview of the Brazilian Financial Market.

An overview of the Brazilian Financial Market.

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  • 1. Brazil Financial Markets Summer Semester ICorinna Ziegler , Thomas Ruschke & Yodit Abera
  • 2. Agenda  Stock Market (BM&F Bovespa)Financial Markets: Brazil • Performance compared to MSCI World Index  Bond Market • Performance  Biggest Financial Institutions • Banco Santander Brasil • Banco de Brasil  Sources 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 2
  • 3. BM&F Bovespa  Brazilian stock market (BM&F Bovespa)Financial Markets: Brazil • May 8, 2008: merger of › São Paulo Stock Exchange (Bovespa) › Brazilian Mercentile and Future Exchange (BM&F) • World„s 3rd largest stock exchange (New York Stock Exchange, NASDAQ) 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 3
  • 4. BM&F Bovespa  2010, three most valuable stocks: • BNY Mellon Brazil Equity – EUR AFinancial Markets: Brazil • CAAM Funds Brazil S • Credit Suisse Equity Fund (LUX) Brazil B Acc • iShares MSCI Brazil (index to be compared to MSCI World Index) Source: http://www.forbes/com/markets 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 4
  • 5. BM&F Bovespa  Performance of BOVESPA compared to MSCI World Index (January 2006 – Current) Source: http://www.bloomberg.comFinancial Markets: Brazil 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 5
  • 6. Market Performance Performance variables  Brazil:Financial Markets: Brazil • BR ($) as key “commodity currency” • Steady growth of BOVESPA (2006-May 2008) • February 2008: › La Nina weather patterns are negatively affecting soybean crop yield • May 2008: › BOVESPA reaches peak but followed by a bad soybean crop yield › Brazil cut interest rate from 13.75% to 12.75% Source: http://www.bloomberg.com 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 6
  • 7. BM&F Bovespa  Performance of BOVESPA compared to MSCI World Index (January 2006 – Current) Source: http://www.bloomberg.comFinancial Markets: Brazil 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 7
  • 8. Market Performance Source: http://www.bloomberg.com  October 2008:Financial Markets: Brazil • Lehman Brothers bankruptcy  U.S. affect on markets • International investment is high = affect the market • Federal Reserve › swapped $30 billion with Brazil to bolster foreign currency reserves  In Re: • Brazils government lost 1/3 of its value against the Japanese Yen • Brazil struggling to re-valuate its currency 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 8
  • 9. BM&F Bovespa  Performance of BOVESPA compared to MSCI World Index (January 2006 – Current) Source: http://www.bloomberg.comFinancial Markets: Brazil 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 9
  • 10. Market Performance  July 2010:Financial Markets: Brazil • China has replaced the U.S. as Brazils top trading partner • Chinese imports rose to 57.7% in first half of 2010  13 May 2010: • Announcement of Olympic Games and World Cup to be held in Brazil in 2014 Source: http://www.bloomberg.com 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 10
  • 11. BM&F Bovespa  Performance of BOVESPA compared to MSCI World Index (January 2006 – Current) Source: http://www.bloomberg.comFinancial Markets: Brazil 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 11
  • 12. Market Comparison •Stock Market Source: http://www.bloomberg.comFinancial Markets: Brazil •Global Bond Market Inverse Relationship Brazilian Global Bond in USD - Yield 1Y (% p.a.) 16 14 12 10 8 6 4 2 0 2003 2004 2005 2006 2007 2008 2009 2010 Source: http://www.mercedes-benz-brazil.com 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 12
  • 13. Bond Market  Performance • Inverse relationship to Stock MarketFinancial Markets: Brazil › Investor confidence rises, Bond Market rates decline – Lehman Brothers created exception End of 2008 • Long Term Investment (Cash Flows are Contractual) › Stability is the long-term goal • FDI Volume returning after asset price volatility kept issuers away • Foreign Direct Investment benefits/suffers from Exchange Rate fluctuations › Effective return rates increase exponentially with positive dollar valuation. 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 13
  • 14. Bond Market  Brazilian Global Bond in U.S.($)- Yield 1Year (%p.a.)Financial Markets: Brazil Source: http://www.mercedes-benz.brazil.com 16 14 12 10 8 6 4 2 0 2003 2004 2005 2006 2007 2008 2009 2010 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 14
  • 15. Bond Market  Bovespa • Planning $612 million sale of 10-year bonds • Managed by BofA, Merrill Lynch, Banco Bradesco, JP Morgan and HSBCFinancial Markets: Brazil  Emerging Market Strength: • Announcement of Olympic Games and World Cup to be held in Brazil in 2014 • Stabilizing bond market  Bond Market Performance Related to Inflation Chart from IndexMundi.com 06.03.2012 Financial Markets: Corinna Ziegler & Thomas Ruschke 15
  • 16. Biggest Financial Institutions  Background: • Decades of inflationFinancial Markets: Brazil › Crisis • Measures taken by Central Bank › Introduction of new banking structure – Efficiency – Equity Current trend:  Trend towards privatisation of banks  Brazil injected US$45 billion into: • System to keep credit alive • Avoid an increase in unemployment 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 16
  • 17. Biggest Financial Institutions  Latest IMF forecast for GDP: • projects 2.1% growth in 2010 vs.Financial Markets: Brazil • forecasts for major industrialized countries › largely come in under 1% › some cases are even negative • Corporate deals are increasing  List: Public / Government Banks 1. Banco de Brasil (largest public bank) 2. Banco Votorantim 3. Nossa Caixa Private Banks 1. Itau Unibanco (largest private bank) 2. Bradesco 3. Banco Santander Brasil 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 17
  • 18. Biggest Financial Institutions  Banco de Brasil S.A. • Largest governmental bankFinancial Markets: Brazil • Founded 1808 Source: http://www.yahoo-fincnace.com 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 18
  • 19. Biggest Financial Institutions  Banco Santander Brasil • Santander (Spanish Bank)Financial Markets: Brazil › Recognising that Brazil has become the epicenter of its own growth strategy for Latin America › International expansion › Plan to invest $1.125 billion in Brazil (2009-2010) › Strengthening the Brazilian insurance business • IPO (Initial Public Offering) turnover of R$ 14.1 Billion or U.S. $ 8.9 Billion › the largest stock offering made in BM&F Bovespa 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 19
  • 20. Financial Markets: Brazil  Thank You… 06.03.2012 Financial Markets: Corinna Ziegler, Thomas Ruschke & Yodit Abera 20