Was Brazil’s crash an opportunity or the end of a bull run?
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Was Brazil’s crash an opportunity or the end of a bull run?

Sharp crash in bank shares was followed by marked recovery; risk of political stagnation could lead to larger, longer-term falls in sector.

President Michel Temer's refusal to resign risks more political paralysis in Brazil

Bargain hunters came into the market for shares in the Brazilian banks at the end of last week as investors bought the crash that immediately followed a scandal that threatens to end Michel Temer’s presidency.

However, while the subsequent recovery appeared to put a floor on the sector’s equities, there are some analysts who caution that Temer’s desire to cling on to power could see a slow reversal in what has been one of the world’s best performing asset classes in 2017 – for dollar-denominated investors.

On Wednesday evening, Brazilian newspaper O Globo reported that Joesley Batista, the co-owner of meatpacker JBS, had secretly recorded conversations with politicians as part of the Lava Jato investigation.

The newspaper said it had heard recordings of Temer agreeing a plan to pay the jailed ex-speaker of congress, Eduardo Cunha, to maintain his silence and not cooperate with the ongoing investigations.

The news story led to cabinet resignations and some of the smaller parties in his coalition announced they would be leaving the government. Impeachment proceedings were also filed by opposition congressmen.

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