2024-02-16 18:32:04
After a strong rally at the end of last year, which saw the Ibovespa rise almost 20% between November and December, Brazilian shares are now undergoing a slight correction, falling 3.2% since the beginning of the year.
This drop, however, should not be enough to change the upward trend of the Brazilian Stock Exchange.
For Itaú BBA, the recent drop is the result of profit-taking by investors focused on emerging markets and who had entered Brazil with force at the end of last year.
“We believe, however, that this profit taking is not enough to say that the Ibovespa has entered a long-term downtrend,” wrote analyst Daniel Gewehr.
Itaú said it sees the Brazilian stock market as ‘oversold’, with 73% of shares trading below their average price over the last 42 trading sessions. There are two ways of analyzing this indicator: on the one hand, it is a sign that the Stock Exchange is going through a momentum negative in terms of prices; on the other hand, it can show that the stock market is cheap.
In the long-term analysis — looking at the average price of the last 200 trading sessions — the scenario is a little different, with 50% of shares trading above their historical average.
The bank also said that its technical indicator shows that the Ibovespa is today close to its neutral zone (of 127 thousand points). In Itaú’s accounts, the Ibovespa is overbought when it exceeds 140 thousand points and oversold when it falls below 114 thousand points.
“This indicator is the ratio between the price of Ibovespa and the six-month moving average at the same moment in time. Historically, it has been a good predictor of extremes,” says the bank.
According to an analyst, the Ibovespa has only been able to maintain itself at this level because some securities with a large weight in the index have held up well at the beginning of the year.
This analyst notes that Petrobras represented 39% of the positive return of Ibovespa this year, contributing 2,204 points. The second largest positive contribution was Ultrapar, followed by Banco do Brasil, Itaú and Sabesp.
On the negative side, Vale was the biggest detractor, accounting for a drop of 2,326 points in the index this year, followed by Bradesco, Localiza, B3 and RD.
“But there are many more companies in the index falling during the year than rising,” said the analyst. “Today, 68 companies on the Ibovespa have accumulated declines for the year, compared to just 19 with increases.”
Despite the signs that the stock market is still cheap, Daniel, from Itaú BBA, said that “there still needs to be some trigger to have a call of greater conviction for the market.”
One trigger What could change this perception, from a fundamentalist point of view, would be a new review of earnings of companies, which on a consolidated basis have already been revised upwards by 3% in the last three months.
In the report, Itaú also highlighted the three sectors that it believes have the best momentum today — oil, utilities and TMT — and the six stocks that he considers standouts in this regard — Petrobras, Santos Brasil, Nubank, Banco do Brasil, Vibra and Sabesp.
Bank of America also released some indicators that show that the Ibovespa is cheap.
The bank said today that the index (excluding commodities) is trading at a discount of about 10% to its historical average. At the beginning of the year, this discount was 5%.
According to BofA, withdrawals from local equity and multimarket funds are decreasing. Last week, withdrawals from equity funds were close to zero compared to an average of R$800 million per week over the last three months.
Multimarkets still had withdrawals last week, but at a much lower level than the average of the last three months: R$800 million now compared to an average of R$3 billion per week in the last three months.
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