By Aleksandar Adamovic
Investors should monitor international companies with exposure to Brazil as it appears market friendly right-wing candidate is in strong position winning the presidential election. In addition, traders should focus on potential actions from U.S as President Trump mentioned that Brazil treats US companies unfairly.
We have recently written about how the Brazilian markets have rallied due recent poll putting right-wing candidate Bolsonaro in a comfortable lead ahead of the presidential election. There are plenty of international stocks that have large exposure to Brazil that also could benefit from strengthening Brazilian economy.
Earlier we noted that European companies Telecom Italia (TI TI) generates 25% of revenues from Brazil, while Telefonica (TEF SM) receives 50% of their revenue from Latin-America, including Brazil. Both these stocks have been trading close to lows, but it appears they might have bottomed in recent days. If the positive sentiment for emerging markets and Brazil in particular continues, these stocks could continue to benefit.
Telefonica was one of the top gainers in Euro Stoxx 50 today. We haven’t seen that in a long time.
Furthermore, there are various companies in the US which have exposure to Brazil. Below is a table Goldman Sachs have put together showing % exposure to Brazil. These will also be good stocks to monitor as events unfold.
Source: Goldman Sachs
Finally, Investors should pay attention potential tariffs on Brazil from President Trump. Bloomberg writes;
While celebrating a new trade deal with Canada and Mexico as an “historic” win that vindicated his strategy of threatening tariffs on trade partners, Trump said Brazil is treating U.S. companies unfairly.
“They charge us whatever they want,” Trump said Monday in a Rose Garden ceremony, while responding to a question about high tariffs in India. He said U.S. companies describe Latin America’s largest economy as one of the toughest in the world
This could be a big risk, as President Trump has shown he is not afraid to use tariffs to get better deals/access for U.S. companies.