February 27, 2019 / 4:12 PM / 3 months ago

Brazil pension reform savings to be 690 bln reais -Morgan Stanley survey

BRASILIA, Feb 27 (Reuters) - Reform of Brazil’s social security system will deliver savings of 690 billion reais ($184 billion) over the next decade, according to the average estimate of a Morgan Stanley client poll.

That would be less than the 1.16 trillion reais savings envisaged in the draft bill President Jair Bolsonaro delivered to congressional leaders earlier this month, but enough to keep investors bullish on Brazilian assets this year, the poll found.

Investors remain “very optimistic” on the prospects for pension reform, with 93 percent expecting Congress to approve some version of the bill this year, the U.S. investment bank’s survey of nearly 100 clients published late on Tuesday showed.

Some 29 percent of those polled expect savings of between 700 and 800 billion reais, and 18 percent forecast savings of more than 800 billion ($214.3 billion). Only a fifth of those polled expect total savings of less than 600 billion reais ($160.7 billion).

About 40 percent of those polled were Brazilian clients and 60 percent international clients.

“It is important to note the average responses from Brazil and ‘Rest of the World’ based clients on these topics were very similar,” Morgan Stanley said.

Brazilian assets have performed well since right-wing former army captain Bolsonaro was sworn in on Jan. 1, with investors feeling positive about his plans to slash public spending, cut taxes and increase privatizations.

Clients who responded to the poll pointed to equities as the asset class with the most upside potential. They expect the Bovespa index to post an average return of 13 percent between now and the end of the year.

Locals were more optimistic, expecting an average rise of 16 percent, while international clients forecast an average Bovespa index rise of 11 percent.

Brazil’s real will increase on average 4 percent this year, survey respondents said, but could rise 8 percent if pension reform savings top 800 billion reais and fall 11 percent if savings are less than 400 billion.

Reporting by Jamie McGeever Editing by Bill Berkrot

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