Citi cautious on Brazilian retail sector

Initiating cautious coverage on 8 Brazilian retail sector names (7 Holds, 1 Sell), Citigroup says multiples look expensive considering macroeconomic headwinds - among them rising inflation and interest rates coupled with a high level of consumer indebtedness.

"Slower demand presents top-line risks for Brazilian retailers exposed to the mid- and lower-income segments. Moreover, inflation could push operating expenses up while rising interest rates pressure financial costs for leveraged companies."

The central bank hiked the Selic for the 5th straight meeting last month and gave no indication it's going to break the string in November.Brazil ETFs: EWZ, BRF, BZF, BRXX, EWZS, BRAQ, BRAZ, BZQ, BRAF, UBR, BRZU, FBZ, BRZS, DBBR

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