Two Reasons to Try the Brazilian Stock Exchange

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On Oct. 23, shares of Bovespa [the São Paulo Stock Exchange] made their debut on the stock market (SAO: BOVH3). The company sold 288.1 million shares at 23 reais [Brazilian currency] each, raising 6.63 billion reais ($3.7 billion). The price was at the high end of the range of between 20 and 23 reais per share. In response to strong demand, the forecast was raised by more than 20% on Oct. 23 from a band of between 15.5 and 18.5 reais. The sale established the market value of Bovespa at $9.179 billion, making it the fifth-largest of the world's 23 publicly traded stock markets.

Hugo A. Macías Cardona, director of the CIECA research center at the University of Medellín in Colombia, notes, "Although the amount of money raised through the new share offering may appear to be predictable, this move is unprecedented in Latin America. It sends a clear signal that private capital has confidence in this particular operation and in the management of this stock market in general. ... Don't forget that Brazil has claimed its right to lead the countries of the region. Its new strength will enable it to attract capital similar to the way the U.S. dollar attracts global capital to the U.S."

An Upward Trend in the Market

Bovespa's share offering received an extremely important boost from the Brazilian stock market, which has risen by more than 40% during the current year, a lot faster than the principal global indices . The Dow Jones and S&P 500 in New York have gained 9% and 6%, respectively, since January. The Euro Stoxx 500 has risen by 7%, the Dax Xetra in Germany by 19% and the FTSE in London by 9%. Nevertheless, the experts believe that the upward trend in the Brazilian share prices will enter a phase of slower growth .