A new era of monetary easing in Brazil is set to unlock value in the nation’s stock market, according to one of the world’s top emerging-market equity investors.
(Bloomberg) — A new era of monetary easing in Brazil is set to unlock value in the nation’s stock market, according to one of the world’s top emerging-market equity investors.
Ivo Kovachev, whose $51 million JOHCM Emerging Markets Discovery Fund has outperformed 96% of peers this year, says Brazilian consumer and information technology stocks are poised to benefit as lower interest rates help jumpstart Latin America’s largest economy.
“That’s put a nice support for the stock market, which is now rebounding from very low levels,” said the Prague-based J O Hambro Capital Management money manager. “It’s relatively cheap, and we see things there very positively.”
Brazilian policymakers on Wednesday slashed their benchmark interest rate by a larger-than-expected 50 basis points and signaled more cuts of the same size are coming. The Ibovespa, Brazil’s benchmark equity index, has climbed 17% in the past three months and rose Friday.
The policy pivot stands to have an outsized impact on spenders in the nation, who’ve been pinched by the highest borrowing costs in more than half a decade, said Kovachev, who manages the fund alongside Emery Brewer and Stephen Lew. The fund invests in both Locaweb Servicos de Internet SA, which offers internet services to customers in Brazil, and apparel company Lojas Renner SA.
At the same time, Kovachev is taking a more-cautious approach to “hype bubbles.” He’s paring back some of the fund’s biggest positions in Taiwanese chipmakers, which have soared in 2023 as Wall Street embraced technology that helps power artificial intelligence.
That includes bets on Alchip Technologies Ltd. and Global Unichip Corp., as well as India-based KPIT Technologies Ltd., which provides artificial intelligence software to automobile companies.
The fund, known as JOMEX, focuses on small and medium capitalization stocks in emerging markets and has returned 19% this year, compared to an average rise of about 9.5% among peers, according to data compiled by Bloomberg. It’s also outperformed 96% of peers over the past five years, the data show.
–With assistance from Vinícius Andrade.
(Updates share prices in fourth paragraph and adds fund detail in last paragraph.)
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