Sao Paulo stock exchange closed the week with the Ibovespa in a new historical record on Thursday, above 97,000 points for the first time, supported by positive bets for the country’s economy and in the wake of recent signs of the government reiterating commitment to fiscal adjustment, a crucial issue for investors.
While left-wing journalists show hostility to the Bolsonaro administration, the market celebrates provides explicitly its adherence to the pronouncements of Bolsonaro and his staff.
Brazilian stock market benchmark index, Ibovespa rose 1.16 percent to 97,677.19 points, at the session’s high and closing record. The financial volume in the trading session totaled 15.12 billion reais.
In the week, which was shorter for a holiday this Friday in the city of São Paulo, the Ibovespa gained 1.65 percent in the fifth consecutive weekly positive performance.
“There is a generalized euphoria for Brazilian assets and Bovespa is hit one high after another in January,” Bernd Berg, global macro and currency strategist at Woodman Asset Management, citing the Brazilian delegation’s positive impression at Davos.
“I remain optimistic about the Brazilian stock market and I expect the Ibovespa to increase to 130,000 in 2019, amid growing optimism among foreign investors, with new portfolio entries capable of accelerating the recovery of the Brazilian stock market,” he said.
The Minister of Economy, Paulo Guedes, welcomed the market, amidst his participation in the World Economic Forum in Davos, Switzerland, stressing that the Social Security reform is a priority and can yield savings of 700 billion to 1.3 trillion reais in 10 years.
Minister Guedes also said that the government analyzes reducing the income tax rate charged from companies from 34 to 15 percent.
Investors see the change in the country’s current pension system as crucial to improving the Brazilian fiscal situation in order to stabilize the behavior of the public debt in relation to the Gross Domestic Product (GDP).
An improvement in this scenario would have an effect on the country’s long yield curve, which is seen as one of the main metrics for investment in stocks.