(Reuters) – The negative effects of the covid-19 pandemic on Brazilian companies are decreasing and a vaccine at the beginning of next year may support a strong recovery on the São Paulo stock exchange, although the fiscal scenario still promotes uncertainty, he evaluates Florian Bartunek, founding partner of Constellation Asset.
Constellation currently has R $ 15 billion under management and names like billionaire Jorge Paulo Lemann in its corporate structure.
“The stock market may have a robust recovery,” the executive said in an interview with Reuters. He stressed that the economy is returning to work, albeit slowly, and that an eventual start of vaccination against coronavirus in early 2021 will help to improve the perception in the markets about the recovery of companies.
The University of Oxford said this week that it hopes to present results from its candidate’s advanced stage test for covid-19 vaccine this year, raising hopes that the UK will start delivering a successful vaccine in late December or in the beginning of 2021.
“Ultimately, what matters is the performance of companies. Obviously, an exuberant economy helps a lot, but if it is also ‘ok’ good companies will play their part and perform well,” he says, citing that shares are already being traded at prices prior to the pandemic.
After renewing maximums at the beginning of the year, approaching 120 thousand points, the Ibovespa, a reference of the Brazilian stock market, plummeted to almost 60 thousand points with the concerns associated with the covid-19. In the year, despite the recovery, it still loses 13.35%. In dollar, decreases 37%. In the United States, on the other hand, the S&P 500, which also suffered from fears linked to the pandemic, already accounts for an increase of 8.7% in 2020.
According to Bartunek, investors still have doubts about the fiscal framework in Brazil, something that includes an increase in the deficit in public accounts due to measures to mitigate the effects of the coronavirus and the maintenance of the spending ceiling, in addition to the government’s ability to make necessary reforms for the country.
“There are these question marks,” he says. He adds that the National Congress shows intention to accelerate the reform agenda, although he considers that it is something difficult to execute. “But clearly, there is a demand.”
Constellation’s founding partner also calls attention to the behavior of prices in Brazil. Although there is no “huge concern about inflation now”, Bartunek points out that it is a variable that needs to be monitored permanently, especially with the deteriorated fiscal environment.
This Friday, the IBGE reported that the IPCA accelerated the increase to 0.86% in October, from 0.64% in September, the highest result for the month in 18 years and the highest rate of the year. In 12 months, it rose 3.92%, almost at the center of the 2020 target, which is 4% with a margin of 1.5 points more or less.
“If the market starts to perceive that inflation is a problem, it affects the long interest rate… and the higher the long interest rate, the less interesting the stock market is”, he reinforces, remembering that the movement also affects bank credit, raises uncertainties and investors end up being more cautious.
The day before, the president of the Central Bank, Roberto Campos Neto, strongly defended the need for the country to commit to the sustainability of public accounts in the post-pandemic, stressing that without this there is a serious risk of disorganization of market prices.
Bartunek said that there has been a growing interest from clients, companies and investors in investment policies that also consider environmental, social and corporate governance factors, summarized in the English acronym ESG. According to him, starting next year, new names should work harder in this direction in Brazil.
“More robust investors are studying this process and in the middle of next year we will see more names being more vocal in this strategy”, he said.