Moody's upgrade could see increased international trading of Brazilian finance stocks

CommentsPosted: Tuesday 22/09/2009 08:06

If Brazil's sovereign rating gets its upgrade to investment grade from Moody's there could be a push towards more foreign trading of the country's bank stocks, as well as a spark for a secondary market, Moody's VP and senior analyst on Brazilian banks Ceres Lisboa told BNamericas.

Moody's sovereign ratings team put Brazil's government debt rating on review for a possible upgrade in July. In late August, the country's finance minister Guido Mantega said that the announcement that Moody's would join Fitch and S&P in giving Brazil an investment grade should come in September.

Lisboa and Moody's Brasil insurance analyst Rodolfo Nobrega said that the pricing on government securities pretty much already reflects such a rating, but that the ratings team still needed to complete its work.

Banks that have their foreign currency debt and deposit ratings constrained by the country ceiling will get immediate upgrades, which will mean upgrades for most of the debt of the large Brazilian banks, Lisboa said of the possible upgrade.

There also will be some investors that have been sitting out the Brazilian market's rise, but will have to consider getting in, including more international mutual and pension funds, according to Nobrega.

This increased liquidity could be the impetus for a real secondary securities market, Lisboa said, noting the increased control of inflation in recent months and years and the increasingly long-term investment climate taking hold in Brazil.

However, both analysts were quick to point out that changes would not take hold too quickly.

Nobrega said that he saw little changing for insurers in the short term, even though they hold high percentages of their investments in government debt.

Additionally, there have been challenges to the original premise of Moody's sovereign review: the strength of Brazilian fiscal policy in spite of the crisis.

Early this month, Fitch released a report on Brazil's fiscal deterioration, noting a revenue shock for the federal government that could put pressure on the country's debt rating if the government is unable to carry out fiscal consolidation while continuing to prop up GDP growth.

A survey released last week by banking industry group Febraban, which polled analysts and economists from 30 Brazilian banks September 10-11, found market opinion on the 2010 primary surplus dropping to 2.1% from the 2.4% found in the prior study in July. The government had previously committed to 3.3% for 2010.

Article Source: http://www.bnamericas.com/.. ../155094496

Share:

There are no comments for this item yet.

If you would like to leave a comment please login below using the username and password you created when you registered on the My Stock Voice website.

MSV Staff - Stock Trader

Moody's upgrade could see increased international trading of Brazilian finance stocks

Leave a comment