August 12, 2020

Global tension increases the flight of foreign capital on the Sao Paulo stock exchange

Investors’ aversion to risk amid global turmoil and the search for safer assets has led to a flight of foreign capital of nearly $ 10 billion so far this year on the Sao Paulo Stock Exchange, the largest market from South America.

“The foreign investor entered strongly in 2016 and 2017 and from last year began to leave, a movement that was intensified at the beginning of this year by the coronavirus, the increased perception of risk, oil and concern about growth local, “Luis Sales, a stock analyst at brokerage Guide Investimento, told Efe.

From the beginning of January to Monday, March 9 – a day of panic on the world stock markets – foreign investors bought 506.75 billion reais (107.819 million dollars) in shares in the secondary market of shares in São Paulo, but they sold 552,777 million reais (117,612 million dollars).

The flight of foreign capital into the São Paulo square so far this year already exceeds that of the whole of 2019, when a record outflow of 44.5 billion reais ($ 9.479 billion in the current exchange rate) was recorded.

However, the flight of money from abroad was about ten times less (4,694 million reais or 998 million dollars) in 2019 if the IPOs of foreign capital in the primary market are taken into account, which totaled 39,822.9 million reais (8,472 million dollars) in the period.

According to analysts, capital flight may increase in the coming months due to the search for safer assets, such as US debt securities, amid the tension generated by a combination of factors: global turmoil due to the expansion of the coronavirus , the oil price war, the rarefied political climate in Brazil and the still weak growth of the largest economy in South America.

Brazilian GDP increased by 1.1% in 2019, the lowest growth in three years, and the government has made the economy take off subject to the approval of new reforms, mainly administrative and tax, although they have not yet started. to be processed in Congress.

But foreign investment in the Stock Exchange represents only a portion of the total foreign investment in the country. Fixed income, for example, which for some years was an attractive asset, began to lose interest in recent years due to the sharp drop in interest rates, which are at historical lows (4.25% per year the interest rate). reference after having exceeded 14% in 2016).

“If we make an evaluation, the world is more conservative and in Brazil investors do not get a return, interest rates have fallen a lot. That justifies this exit movement,” Filipe Villegas, head of strategy at Genial Inversiones, told EFE.

According to Andre Perfeito, partner and analyst at brokerage Necton, the foreigner has not fully left Brazil, “but is looking for income-generating assets, such as the real estate fund, leaving aside the secondary stock market.”

Villegas, for his part, believes that when the waters calm down internationally and the reforms advocated by the Brazilian government advance in Congress, investors will return to the Brazilian market, albeit in search of other assets.

“The investment, when it returns, is going to have a new destination. Before they invested in fixed income, but they will tend to invest in Brazilian companies, either with open or closed capital,” said Villegas.


Despite the departure of foreign investors, the local investor remains “well positioned” on the Sao Paulo Stock Exchange, which this week suffered a historic drop after several months of euphoria.

Local investors made a strong move to the Stock Market in 2019, coinciding with the first year of the government of President Jair Bolsonaro, who managed to conquer the market with a liberal agenda led by his Minister of Economy, Paulo Guedes.

The São Paulo group closed 2019 with an escalation of 31.58% and its Ibovespa index, benchmark of the parquet, at 115,645 points, but the coronavirus punctured the stock market enthusiasm that in recent months has led to one record after another.

The Brazilian market sank 7.64% on Wednesday at the close of the session, after having interrupted its operations for thirty minutes for the second time in three days of great volatility in the financial market.

The Ibovespa ended the day on Wednesday at 85,171 points, 7,043 less than on Tuesday, when the parquet rebounded 7.14% after the so-called “Black Monday”, in which the parquet sank 12%, infected by the turbulence in the Exterior.

Alba Santandreu


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