Presentation on theme: "BRAZIL : OPPORTUNITIES IN TROUBLED MARKETS LUIZ FERNANDO FIGUEIREDO."— Presentation transcript:
BRAZIL : OPPORTUNITIES IN TROUBLED MARKETS LUIZ FERNANDO FIGUEIREDO
2 FX: Are we in the 2002 path? FX depreciation has been even more agressive this time than it was in 2002. But there are crucial differences: a)Today, Public Debt as % of GDP goes down with FX depreciation (2002 was the opposite); Net Public Debt as % of GDP 35.0 40.0 45.0 50.0 55.0 60.0 -3-2012345678 Months 2002 2008 forecast
3 FX: Are we in the 2002 path? b) Less deflacionary this time, since Commodity Prices are falling; c) External Accounts are considerably more balanced External indebtedness indicators20012002200420062008 Total external debt / GDP (%) 41.2 45.9 30.3 16.1 14.0 Net total external debt / GDP (%) 31.9 35.9 20.4 7.0- 1.1 Debt service / exports (%) 84.9 82.7 53.7 41.3 20.6 Reserves / short-term external debt 66.7 64.6 99.3 211.7 292.7 Total external debt/exports (ratio) 3.6 3.5 2.1 1.3 1.1 Current account/GDP (%)- 4.2- 1.5 1.8 1.3- 1.5 FDI/GDP (%) 4.1 3.3 2.7 1.8 2.2
The Brazilian stock market underperformed, despite solid macroeconomic fundamentals Even though companies did take advantage of the bull market’s abundant liquidity, they are being penalized on a relative basis. Foreign outflow is contributing to exaggerated movements. Brazil once again is being traded at a discount when compared to Latam, EM and World P/Es. Source: Bloomberg, Economática, Bovespa
Brazilian banks are less exposed to the crisis because : (1) They are not exposed to the subprime market (2) There is not the issue of being “too big to be saved” (3) Housing credit still low as % of GDP. Sectors, such as financial, are being excessively penalized due to the global credit crisis Source: Financial Times, Company Data, Banco Central do Brasil, Mauá Consultoria
Seeking comfort in valuation: even stress testing our base case scenario, upside is attractive Source: Bloomberg, Company Data, Mauá Consultoria Average historical multiple: 10.9 Stressing the scenario for one of the banks under our coverage shows that worst case equals banks trading at average historical P/E, considering maintenance of spreads.