The tumble in the Bovespa index is a “correction” and not a “crash” as Brazilian stocks approach bottom amid cheap valuations, Banco Santander SA said.
“We continue to expect a rebound in Brazilian equities in the coming months, triggered by marginal improvements in the economic indicators of developed countries,” Marcelo Audi, a Sao Paulo-based analyst at Santander, wrote in a note to clients today.
The Bovespa slumped 28 percent from a November 2010 high through last week as concern the global economic recovery is in peril drove down commodity producers while consumer stocks dropped amid rising interest rates and quickening inflation. The Bovespa traded at 8.7 times analysts’ earnings estimates on Aug. 5, the lowest level since March 2009, data compiled by Bloomberg show.
Audi recommended taking advantage of the selloff by adding to holdings of real-estate developer BR Properties SA (BRPR3) and mining companies such as Vale SA (VALE3) and MMX Mineracao & Metalicos SA. Investors should cut holdings of homebuilders and Braskem SA (BRKM5), Latin America’s largest petrochemicals producer, he said.
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