The BM&FBOVESPA stock exchange in São Paulo, Brazil is the 8th largest in the world. In 2000, it created new listing segments like the Novo Mercado to encourage higher corporate governance standards. This increased investor protections and led companies in these segments to outperform the broader market index. The success of the Brazilian stock market is also attributed to the number of IPOs, development of private equity and asset management industries, and Brazilian companies using equity offerings to fund international acquisitions. The exchange also has various sector, governance, and sustainability indexes to track performance in different areas.

1. STOCK MARKET IN
BRAZIL
Akhil Sharma
767

2. History
 The BM&FBOVESPA is a stock
exchangelocated at São Paulo, Brazil. As of
December 31, 2011 it had a market
capitalization of US $1.22 Trillion, making it in
the 8th largest stock exchange in the world.
On May 8, 2008, the São Paulo Stock
Exchange (Bovespa) and the Brazilian
Mercantile and Futures Exchange (BM&F)
merged, creating BM&FBOVESPA. The
benchmark indicator of BM&FBOVESPA is
the Índice Bovespa.

3. Listing Segments
 In 2000, Bovespa created three new listing segments, the Novo
Mercado (New Market), Level 2 and Level 1 of Corporate
Governance Standards, allowing companies to accede voluntarily to
more demanding disclosure, governance and compliance
obligations. The new listing segments mostly languished until 2004,
when a growing number of newly public companies began to list on
the Novo Mercado and other segments as part of a capital-raising
effort. From 2004 to 2010, the vast majority of new listings on the
Bovespa were made by Novo Mercado, Level 2 and Level 1
companies.
 The Novo Mercado, Level 2 and Level 1 segments are based on a
contractual agreement of the listed company, its controlling
shareholder, and its management to comply with specified
regulations. In addition, listed companies must submit to arbitration
as a method of resolving disputes. The set of protections entailed
by a Novo Mercado listing is apparently deemed by market
participants to increase the attractiveness of companies. The stock
market index of Novo Mercado listed companies (the IGC) has
consistently outperformed the broader Ibovespa index since its
launch.

4. Brazilian equity capital markets:
Recent success
 The recent success of the Brazilian equity capital markets is
attributed to a significant extent to the credibility engendered by the
Novo Mercado regulations. In 2007, only the United States and
China equity markets had a greater number of initial public
offerings. The availabiltity of a "market exit" has also encouraged
the development of a private equity industry, a growing Brazilian
investment banking market and a thriving asset management
industry.
 Another side benefit of a thriving equity market has been access to
equity financing for the international expansion of Brazilian
business.Brazilian multinational companies have used the proceeds
of equity offerings to fund a growing number of international
acquisitions. Vale, Embraer, Gerdau, Brazil Foods, Marfrig
Alimentos and JBS have acquired businesses outside Brazil using
the proceeds from equity offerings.
 Attractive valuations of Brazilian subsidiaries have led international

5. Broad Indexes
 IBOVESPA: Total return index comprising the most representative companies in the
market, both by market cap and traded volume. It is the benchmark index of São
Paulo Stock Exchange. It is the oldest BOVESPA index, and it is being broadcast
since 1968.
 IBRX 50: Also called Brasil 50, it comprises the 50 most traded equities at
BOVESPA.
 IBRX: It has the same purpose of IBRX 50, but embracing the 100 most traded
equities.
 IBRA: Brazil Broad-Based Index, it comprises a wider range of companies, aiming to
embrace 99% of all companies already selected for any other exchange indexes. Its
main goal is to represent the most relevant companies in the stock exchange.
 MLCX: The Midlarge Cap Index shows the performance of the most relevant
companies at the exchange, responding for at least 85% its total market value.
 SMLL: The Small Cap Index comprises relevant companies who don't apply for the
MLCX listing, i.e., heavily traded companies which does not fill the 85% market share
criteria.
 IVBX: It was conceived as an index to trail the 2nd tier companies, defined as those
which trading ranking is from 11th and beneath, therefore not to be classified as blue
chips. Nevertheless most of its members are highly relevant companies, needing to
comply with high traded volume and market capitalization.
 IDIV: The Dividend Yield index, it comprises companies which show the highest
dividend yields values in the market, along with a strong trading session
participation.

6. Sector Indexes
 Sector Indexes
 IEE: Electric Power Index.
 INDX: Industrial Index.
 ICON: Consumption Index.
 IMOB: Real estate Index.
 IFNC: Financial Index (comprising banks, credit
card processors, insurance companies, etc.).
 IMAT: Basic Materials Index (representing raw
materials, pulp & paper, packaging, steel, etc.).
 UTIL: Public Utilities Index (electric power, water
& sewage, gas, etc.).

7. Corporate Governance Indexes
 Corporate Governance Indexes
 IGC: Corporate Governance Index comprises all
companies listed in any of the distinctive
governance levels, irrespectively of its market
cap.
 IGCT: Corporate Governance Trade index filters
the IGC components by trading liquidity.
 IGNM: The New Market Index congregates all
listed companies in the New Market portion of the
BOVESPA.
 ITAG: The Tag Along Index is composed of
equities that offer to his bearer privileged tag
along rights compared to those granted by
Brazilian law and a minimum trading volume.

8. Sustainability Indexes
 Sustainability Indexes
 ICO2: Efficient Carbon Index is granted to
companies who complies with efficient efforts
to control GHG emissions and are eligible for
IBRX 50.
 ISE: Corporate Sustaintability Index is
comparable to the DJSI, to join companies tied
to environmental, social and accountability
goals.