🚨 Citi and BCA Research DOWNGRADE Brazilian assets after the election.
Citi withdrew its buy recommendation on stocks and closed its long position in the real.
In the bank’s words: "we are closing our exposure to Brazilian risk".
BCA downgraded stocks, local-currency bonds and sovereign bonds to underweight—that is, it recommends holding less exposure to Brazil than the emerging-market average.
The reasons: greater default risk, weaker growth and inflation fueled by the depreciating real.
The backdrop here is fiscal.
The market had expected fiscal discipline and reforms, and is now pricing in looser spending and higher debt.
When fiscal risk rises, those who keep all their money in reais are the first to pay the price.
I hope you’re not one of them.
Citi withdrew its buy recommendation on stocks and closed its long position in the real.
In the bank’s words: "we are closing our exposure to Brazilian risk".
BCA downgraded stocks, local-currency bonds and sovereign bonds to underweight—that is, it recommends holding less exposure to Brazil than the emerging-market average.
The reasons: greater default risk, weaker growth and inflation fueled by the depreciating real.
The backdrop here is fiscal.
The market had expected fiscal discipline and reforms, and is now pricing in looser spending and higher debt.
When fiscal risk rises, those who keep all their money in reais are the first to pay the price.
I hope you’re not one of them.
