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BUENOS AIRES / SAO PAULO / MEXICO CITY, 25 Nov (Reuters) – Stocks of razilian B will reach pre-pandemic levels by the middle of next year, but concerns about the impact of a second wave of coronavirus cases could limit recovery, a Reuters poll aired on Wednesday.
The benchmark Bovespa stock index is expected to partially cover that road by the end of 2020. The index has risen 70% from lows caused by COVID-19, which has caused nearly 170,000 deaths in Brazil.
However, Latin America’s largest equity market is seen stalling in the second half of 2021 due to concerns about the potential damage caused by a recurrence in the second-worst country after the United States.
“Increasing uncertainty and the possibility of a repeat of the lockdown in Europe and America carries a tougher scenario which, if materialized, will stop Ibovespa,” said Alexandre Jung, head of equity at Vero Investimentos.
The index is expected to close this year at 108,000 points, 0.6% above its value on Monday, and then climb to 117,500 points – close to its record in January – by mid-2021, the median estimate of 10 strategists surveyed on November 12 – 23 shows.
But it is expected to trade not too far from that level by the end of 2021, with investors on alert for any improvement in the precarious state of Brazil’s public accounts and the next steps of President Jair Bolsonaro’s administration.
Last week, credit rating agency Fitch affirmed its ‘BB-‘ rating on Brazil’s sovereign debt but maintained its negative outlook, citing a sharp widening in the government’s budget deficit and soaring debt.
“Investors will only look again at increasing their exposure to the country’s risk assets once important political and economic issues are determined in 2021, which will require a lot of effort,” Jung said.
Mexican equities are expected to return to pre-coronavirus levels by the end of next year, up 11% to 46,000 points from a forecast of a close of 41,500 on the last trading day of 2020, the survey showed.
While far short of its July 2017 record of 51,713.28 points, next year’s forecast is much more bullish than the final value forecast for the S & P / BMV IPC index in the last poll taken three months ago, at 42,600 points.
This is explained by speculation that Mexico’s central bank will maintain its dovish stance to ensure an economic recovery that does not have the massive spending stimulus imposed by its neighbors.
“As Mexico’s benchmark interest rate will likely stay at 4.0%, offering negative yields in real terms, investors will be looking for better returns on the local stock market,” said Gerardo Copca, chief market analyst at MetAnalisis.
Another story from the Reuters global stock market poll package: Reporting by Gabriel Burin; Additional polls by Peter Frontini at SAO PAULO, Miguel Ángel Gutiérrez at MEXICO CITY, Richa Rebello and Manjul Paul at BENGALURU; Edited by Ross Finley and Barbara Lewis