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BRAZIL: Ibovespa Falls 1% Amid Uncertainty About Pension Reform Bill

Uncertainty regarding Congressional support for the pension reform bill soured investors’ moods Thursday, leading the Ibovespa, the leading stock market index in Brazil, to fall 1%, at 71,970.99 points and diverging from the optimism seen in the U.S. stock markets. In November, the stock market index fell 3.15%.

“Everyone [in the market] is afraid that the pension reform will not go ahead, after some government comments. The problem is getting the necessary quorum,” said H. Commcor operations desk manager Ari Santos.

According to the speaker of Brazil’s House of Representatives, Rodrigo Maia, there would be no quorum for a possible vote on the pension reform bill next week.

The market is also waiting for PSDB, one of the parties from the government coalition, to state if it will remain an ally to President Michel Temer.

According to Lerosa Investimentos analysts, “the possibility that the reform does not come out” would bring even more discomfort and profit-taking to the Brazilian stock exchange. If Congress fails to vote on the reform in December, the chances are that there will be no vote on that subject in 2018, when Brazil will go through general elections.”

In the corporate side, the electricity sector was among the most affected due to fears related to the privatization of Eletrobras (ELET3 -6.30%, ELET6 -5.74%). The most significant drop was CPFL’s shares (CPFL -24.05%). The company will delist from the Brazilian stock market.

Meanwhile, the locally traded U.S. dollar closed up 0.95%, at R$ 3,271, influenced by the market’s perception that the pension reform bill should face more hurdles than expected.

For local analysts, the mood may remain sour at least until the government sets a date for the pension reform vote. Tomorrow, however, investors should take a closer look at the Brazilian Gross Domestic Product (GDP) in the third quarter.

The material has been provided by InstaForex Company – www.instaforex.com

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