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terça-feira, março 02, 2010

Our Mood for Today 02.03.10

Good Morning!

Had today an interesting discussion with one of the traders in here and have to say that we have the same opinion about current and future momentum of the Global Markets and Brazilian Ones particularly. Our main thesis is that Brazil should continue to be one of the stars of the investor's portfolio constellation. Different from the past where at the first moment portfolio managers used to define the asset class and then the location and countries to put the money to work, nowadays it seems to us that the process is a little different with investors starting their allocation analysis and definitions by the locations (focusing on the places with growth potential) and them choosing the asset class to invest on these places. With that in mind and given the good growth perspectives of Brazil we should definitely continue to receive an important part of investor's allocation. The levels to get in will depend on each asset and market but no doubt about the global trend...

This week Mr. Jim O'Neil, of Goldman Sachs, have participated on a conference in Rio de Janeiro and presented some statistics comparing just the BRIC countries. Of course that we should be better positioned when compared with Russia and India but, the interesting point is that when you take into consideration not just numbers but the entire economic environment (institutions, diversification of our economy, local demand, democracy, etc), we could also consider Brazil as a better place to invest when compared with China...

FGV announced the IPC-S for the week ending February 22. The index rose 0.84%, above our expectations (0.82%) and slowing compared with the second four-week moving average in the month (1.04%). The main source of downside pressure were dilution of the annual school fee reset and São Paulo bus fare hike, but cooler food prices also contributed to the deceleration.

IBGE announced also the February IPCA-15. It came in line with our expectations with a rise of 0.93%, sharply up from the reading for the previous month (0.52%).

Also on Tuesday IBGE publishes its monthly survey of retail sales (PMC), with the findings for December 2009. Our estimates show the headline index staying flat at the margin and rising 10.2% year over year thanks largely to persistently strong sales of office material and computers. Supermarket sales and durables will have contributed most, rising by double digits year over year. The extended index, which includes automotive vehicles and building materials, is estimated to have risen 2.0% at the margin and 17.4% year over year, with auto sales and sales of building materials both growing strongly.

The Central Bank issues its report on the external sector with details of the January balance of payments. Despite a merchandise trade deficit of US$166.0 million, contrasting with a surplus of US$2.1 billion in December, we estimate a decrease in the current-account deficit to US$3.8 billion, from US$5.9 billion in December. The explanation is that profit and dividend remittances were down in January compared with December, when subsidiaries of multinationals typically transfer larger amounts to their parent companies for year-end book closing. A slightly smaller deficit in services will also have contributed. In the capital and financial account, foreign direct investment (FDI) will have reached only US$800 million, reflecting among other things increased global risk aversion and a resulting decrease in the flow of foreign funds despite the potential for economic growth in Brazil in 2010.

Analyzing each market now:

- Currency Market: We keep our call and recommend that if we should do something today would be betting on the upside of the USD for the next trading sessions after the good rally of BRL...

- Interest Rate Market: After the IPCA almost in line with market expectations the weak retail sales will push rates down around here...

- Stock Exchange Market: The profit taking movement should continue during the trading session. Resistance/Support: 68.880/66.730.

- Sovereign and Corporate Debt Market: It seems to me that market should get momentum after a couple of weeks without any Brazilian Name tapping the market. Concerns regarding the Euro Zone has diminished and like mentioned above, Brazilian Assets should be favored on the investor's reallocation process going forward...Brazil 5Y CDS is trading around 132.5 bps (+3 bps). BR 40 is trading around 157 bps (+4 bps).

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