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BRAZIL : OPPORTUNITIES IN TROUBLED MARKETS LUIZ FERNANDO FIGUEIREDO.

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Presentation on theme: "BRAZIL : OPPORTUNITIES IN TROUBLED MARKETS LUIZ FERNANDO FIGUEIREDO."— Presentation transcript:

1 BRAZIL : OPPORTUNITIES IN TROUBLED MARKETS LUIZ FERNANDO FIGUEIREDO

2 2 FX: Are we in the 2002 path? FX depreciation has been even more agressive this time than it was in 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 Months forecast

3 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 indicators Total external debt / GDP (%) Net total external debt / GDP (%) Debt service / exports (%) Reserves / short-term external debt Total external debt/exports (ratio) Current account/GDP (%) FDI/GDP (%)

4 Real Interest Rates Quite high by any standard

5 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

6 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

7 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.


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