10 de febrero de 2015 / 14:28 / en 3 años

Verde hedge fund expects repricing of Brazil assets, especially currency

SAO PAULO, Feb 10 (Reuters) - Verde Asset Management, Brazil’s largest hedge fund, expects investors to become more skeptical about Brazilian stocks, bonds and currency, whose prices are failing to reflect the ongoing deterioration of the nation’s economy.

In the first monthly letter to investors since spinning off from Credit Suisse Group AG, money managers led by Luis Stuhlberger said they are positioned for a “de-rating of Brazilian assets,” especially the currency, which they defined as the one “with the most erroneous pricing.”

The real, which touched a 10-year low on Tuesday, should help adjust Brazil’s deficit in external accounts. Verde said a decline in the real would be able to narrow an estimated $34 billion shortfall in Brazil’s balance of payments this year.

“Only a few times in my long professional career have I seen such a perfect alignment of negative circumstances that could trigger a currency depreciation,” said Stuhlberger, whose Verde FIC FIM hedge fund has posted total returns over 9,550 percent since its inception in 1997.

According to Stuhlberger, the real has remained relatively stable in a range between 2.70 reais and 2.80 reais in recent weeks because of the swelling difference between Brazilian and global interest rates, which is the biggest carry among investment-grade countries.

Verde’s defensive approach comes after domestic markets underperformed for the past three years and erratic economic policy decisions weighed on confidence in state-owned firms. Last year, Brazil had the highest current account gap since 1947, while the shortfall in the government’s primary balance, or excess of government revenues before debt payments, was the widest since 2002.

Brazil’s ongoing stagnation could extend for another year and inflation may end well above the ceiling of the central bank’s official target, 6.5 percent.

The lack of policy clarity could keep investors away from Brazilian equities, the letter said, adding that the economy is becoming too dependent on Finance Minister Joaquim Levy to curb spending. It also relies too much on President Dilma Rousseff’s willingness to institute tougher adjustments.

In the letter, Stuhlberger explained that the resistance of Brazil’s benchmark Bovespa stock index to fall below 49,000 underscores the growing relevance of financial stocks and beverage giant Cia de Bebidas das Americas SA, or Ambev, which are oligopolistic in nature and resilient in economic downturns.

Verde is using options to bet on a decline in the Bovespa, the letter added. (Reporting by Guillermo Parra-Bernal; Editing by Nick Zieminski)

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