Following reports President Temer would be involved in a bribery scandal , Bovespa lost on thursday 9% and Real 6.5% in a complete panic mode. Markets are fearing Brazil could enter another period of political trouble endangering ongoing needed social and pension reforms . The Msci ishares Brazil ETF is down 16% on the day !!! which might price already part of worst case scenario i.e. prolonged political uncertainty ( Temer resigning or not , no reforms being implemented,..)
Our recent Tactical Buy Vale opened yesterday at USd 7.49 and is trading today pre market at USD 8.25, just to show the extent of the panic. In my ( .. and most of analysts this morning) opinion this is clearly an exaggeration.
Here below Petrobras chart : PBR lost 16% in USD terms … / see also Barron’s on PBR for more fundamentals reasons why to step in .
Action : Buy 0.5 unit in petrobras at opening (Max USD 9.10) and 0.5 unit at yesterday’s closing price of USd 8.50 based . Rationale 1/ Panic move 2/ Volume 3/ Low end of trading range .
Action : Buy 1 unit in EWZ (iShares Brazil ETF) for an exposure to Brazilean market in USD terms (down 16% yesterday ) at opening (Maximum USD 34.75) .
Petrobras in Barron’s last week end :
Re-energized Petrobras Headed Higher – Barron’s