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  • Good Time To Buy Brazilian Bank Stocks 0 comments
    Dec 24, 2012 2:14 AM

    Any investment in Brazil Financials Sector surely makes for an interesting viewpoint. Not only does it enjoy a position that is a source of envy for most global banking institutions, the country has enough cash mileage to very well sustain the global low-downs of 2013 in case the European and the American markets fail to generate enough risk appetite for the coming fiscal year.

    Sound financial decisions like paying off the debt prior to the credit crisis occurrence has enabled the economy to be much better off in contrast to the rest of the world markets. A higher flexibility to further lower the interest rates proves a presence of a strong banking system. Moreover the nation's low dependency on the exports and growing internal consumption from the rising middle classes will make sure that the growth and development of the equity markets will continue and more importantly of the invested money in the economy in general and Brazil Financial Institutions in particular.

    A snapshot: 2012 and further on means an elevated status for its population (190 million) as more and more citizens move out of poverty. The middle class strata are now a majority among the population and the projected purchasing power is welcome news while one assesses buying into Brazil banks.

    The South American leader has abundance of natural resources with positive oil and gas reserves and is world's largest producer of some of the cash crops such as coffee and sugarcane. Manufacturing of automobiles, computers, consumer durables, aircraft, steel and petrochemicals account for 31 per cent of this country's GDP. The rest 55 per cent includes health care, banking, insurance and retail sector. The global melt down engulfing Europe, United States of America and possibly Asia seemed to distance itself from Brazil as its government adopted policies that included lowering of interest rates in order to stimulate its economy. Today Brazil has surpassed United Kingdom and has attained the spot of world's sixth largest economy. The International Monetary Fund in a confident evaluation believes it would soon pass France to become the fifth largest economy by 2015.

    Banking Institutions at the helm of the growth is a good bet for somebody seeking exposure to the Rio markets, not only owing to promising growth, but also due to the low prices they are available at. The national index I Bovespa Index has been under stress in 2012 mostly in tune with the rest of the world, although none of the downsides were due to any internal reasons and respective recoveries have proved that. Because of a current slowdown in the top end oil exports which has China as the biggest buyer. Large Cap bank equities like Banco Santander Brasil [Ticker:BSBR] have had price cut starting May 2012. Oil and gas sector, which along with banking is the mainstay of the economy, will show good figures as soon as the situation at China improves. Individually stocks like ItauUnibank Holdings and BancoBradesco are good products offering long term growth although foreign investors are better off with broader products like Brazil Financials ETFs.

    Foreign investors stand to gain from the easy entry regulations and liquidities tagged along with the Brazil financial industry funds and receive exposure spectrum wide enough to engulf all major banking players. A pure play on this asset class is Global X BRAF ETF which has exclusive asset kitty of the bank stocks. Other options include I-shares Brazil ETF but are not focussed on banking alone. The conviction in this Latin growth story is enhanced with an understanding that cyclic setbacks are not going to deny the glory that Brazil deserves and like China, it will decouple from the worldwide slowdowns as people of the country will drive growth and economy of this carnival country. Invest Brazil Financials Sector should in fact take low prices as good buying terminals in the wake of the state hosting the coming Olympics.

    Global X Brazil Financials ETF is a non diversified fund that correlates to the performance of Solactive Brazil Financials Index. Portfolio wise one acquires top three assets in the likes of BancoBradesco, ItauUnibsanco Holdings and Banco Santander Brasil among other holdings.

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