BRAZIL STOCKS PUSH UP TO 23% AS IMPEACHMENT LOOMS FOR BRAZILIAN PRESIDENT...

BRAZIL STOCKS PUSH UP TO 23% AS IMPEACHMENT LOOMS FOR BRAZILIAN PRESIDENT ROUSSEFF

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BRAZIL STOCKS PUSH UP TO 23% AS IMPEACHMENT LOOMS FOR BRAZILIAN

– Markets Gather on Prospect of Rousseff Impeachment

– Newspapers Allege Strength of Opposition Votes To Move Forward

– Brazilian Real Leads Losses amid $24.7 Billion in Swap Sales

BRAZIL STOCKS PUSH UP TO 23% AS IMPEACHMENT LOOMS FOR BRAZILIAN
President Dilma Rousseff

BRAZIL STOCKS PUSH UP TO 23% AS IMPEACHMENT LOOMS FOR BRAZILIAN

There recently have been speculations that President Dilma Rousseff will be impeached by lawmakers and they would usher in a new government that can fix the economy.

As a result, Brazilian stocks have extended a rally that has pushed the benchmark Ibovespa up to 23 percent this year.

“Political change can bring about much better economic times, and certainly markets are anticipating that.” Gerardo Rodriguez, a money manager at BlackRock Inc. in New York and a former deputy finance minister for Mexico, said on Bloomberg Television. “It’s certainly a time of opportunity. We’ve been trading Brazil on the equity side so far, trying to enjoy the rally but also being careful on what is going to happen.”

According to Bloomberg Terminal, the Ibovespa led gains that the Americans after local newspapers’ scoreboards showed that the opposition has the votes needed to pass the impeachment request in the lower house.

The move is seen halting the quagmire that has prevented the approval of measures to revive Latin America’s largest economy. Financial markets have rallied prospects of a more business-friendly Vice President Michel Temer taking over.

Gathered was that this week’s gain got to 5.8 percent since the Ibovespa climbed 1.6 percent to 53,227.74 at the close of trading Friday in Sao Paulo

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BRAZIL STOCKS PUSH UP TO 23% AS IMPEACHMENT LOOMS FOR BRAZILIAN
Brazilian lawmakers in a parliamentary session

Around the world, state-controlled companies including oil producer Petroleo Brasileiro SA and Banco do Brasil SA climbed at least 3.5 percent.

For the first time, the Brazilian dollar notes due in 2025 fell, while the cost of protecting bonds against nonpayment using five-year credit-default swaps rose in six days.

The real lost 1.4 percent to 3.5321 after the central bank extended this week’s reverse swap sales in a move that’s equivalent to buying dollars in the futures market.

BRAZIL STOCKS PUSH UP TO 23% AS IMPEACHMENT LOOMS FOR BRAZILIAN

From indications, investors across the globe will closely be following the turn of events in the lower house, scheduled to start at 2.pm. on Sunday. Tallies by O Globo and O Estado de S. Paulo showed that the opposition had surpassed the 342 votes necessary to move the impeachment process into the Senate.

There, only a simple majority is required to remove her temporarily. Two thirds of the senators are needed to force her out of office permanently.

The main driver for Brazilian assets over the past two months has been the political turmoil; with the real showing the biggest swings among major currencies and the Ibovespa’s 60-day volatility jumping to the highest level in 15 months. While the stock measure’s valuation remains above that of its emerging-market-peers based on anticipated gains, the index is 28 percent below its peak on May 2008.

“If you look as an investor over the next five years, you’re going to wake up and find that this thing has tripled or quadrupled in value. This is a great entry point even though you might have to bear some short-term noise.” Scott Minerd, the Chief Investment Officer for Guggenheim Partners LLC, said in an interview on Bloomberg Television. “I actually think it’s probably a buy.”

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Although on the currency market, forecasters are still viewing the real to topple more than 10 percent to 3.96 per dollar by the end of this year as China struggles and Brazil’s economy deteriorates.

In addition, to prevent exports from slumping, the central bank has been acting to weaken the currency.

Out of 120,000 it offered on Friday the monetary authority sold 88,500 reverse swaps. This was a move equivalent to buying about $4.4 billion in the futures market. The total amount of reverse swap contracts sold this week was of $24.7 billion.

BRAZIL STOCKS PUSH UP TO 23% AS IMPEACHMENT LOOMS FOR BRAZILIAN PRESIDENT ROUSSEFF

“The central bank acted in a flawless manner this week, working to reduce volatility and holding the currency at a reasonably good level for external accounts.” Italo Abucater, Head of Currency Trading at ICAP Brasil Ctvm in Sao Paulo, said. “Still, today is the last day of trading before the vote Sunday, so politics should drive the trade.”