Investors tiptoe back into Brazil markets as inflation peaks
By Walter Brandimarte
RIO DE JANEIRO, April 17 (Reuters) - Some investors are carefully betting that the recent selloff in Brazilian financial markets was overdone, pointing to signs that inflation is slowing and the government is getting its finances in order.
Many expect inflation will come down from its current 11-year high of 8.13 percent, thanks to the central bank's interest rate hike cycle of 1.75 percentage points since October, as well as the economic slump's effect on demand.
Meanwhile, state-run oil company Petrobras is expected to this month post financial statements that have been delayed by a huge corruption scandal, greatly reducing the risk of a major debt crisis that could have cost Brazil its investment grade credit rating.
President Dilma Rousseff's austerity measures to bring government finances under control have also gained traction in Brazil's divided Congress.
In response, the real and the Bovespa index have both gained more than 7 percent since March 19, when the currency closed at a 12-year low. The Bovespa this week hit its highest level this year.
Five-year local rates have dropped 64 basis points to 12.57 percent over the same period, part of a broad rally in Brazil's local currency-denominated debt.
"Some things should do better now, particularly if you believe interest rates and inflation are really going to come down from here," said Bryan Carter, lead emerging markets portfolio manager for Acadian, a Boston-based fund manager with about $60 billion in assets.
To be sure, none of the investors and economists interviewed by Reuters see Latin America's largest economy pulling out of a recession this year. Nor do they expect markets to rally too much, following a rout that saw stocks lose about 20 percent and the currency weaken more than 30 percent from the beginning of September to mid-March. Continuación...