DEALTALK-Banks pin hopes for Brazil IPO revival on Levy's success

miércoles 4 de febrero de 2015 07:00 GYT

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By Guillermo Parra-Bernal

SAO PAULO Feb 4 (Reuters) - Any revival in initial public offerings in Brazil seems to hinge on whether new Finance Minister Joaquim Levy can clean up public finances and get the country's economy back on track.

Strengthening the market for new listings depends increasingly on how much leeway President Dilma Rousseff will give the University of Chicago-trained economist to cut Brazil's record budget gap and reverse the interventionist policies that marred her first term.

Stung by dozens of deals that failed to deliver the promised returns in recent years, money managers have become cautious about Brazilian offerings. In 2014, only one company went public on the São Paulo Stock Exchange, the worst performance for domestic IPOs in 11 years.

Local pension funds such as Fundação Cesp and global investors like BlackRock Inc have reason to remain wary of Brazilian IPOs. Only a third of the 146 debut offerings that priced in São Paulo since 2005 have generated gains above the benchmark interbank CDI interest rate.

But while Levy's plans for higher taxes and less public spending risk pushing Brazil back into recession this year, institutional investors believe these moves are necessary to pave the way for a sustained rebound.

Investors are waiting to see whether Rousseff, a leftist known for her active role in economic policy, can stomach a downturn while Levy takes unpopular austerity measures to get public accounts back in order.

Without a stable economic backdrop and a renewed commitment to fiscal discipline, institutional investors will remain reluctant to buy into Brazilian companies without much of a track record or earnings visibility.   Continuación...