Global risk-on trumps Brazilian risk as investors eye fresh equity deals
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CAPITAL MARKETS

Global risk-on trumps Brazilian risk as investors eye fresh equity deals

Carrefour subsidiary shows demand for Brazilian IPO; carry trade boosting equity as well as bond performance in Latin America.

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The pricing of the IPO of Carrefour Group’s Brazilian subsidiary Atacadão on Wednesday and Grupo Biotoscana on Friday show that the market is open despite the political uncertainty in the country.

Itaú BBA led the deal, with Bank of America Merrill Lynch, Bradesco BBI, Goldman Sachs, JPMorgan and Santander participating, which priced at the bottom of its R$15 to R$19 range.

The deal raised $1.6 billion and is significant as it is the first IPO in the country since airline Azul in April.

The Azul deal, which was led by Citi, Deutsche Bank and Itaú BBA, had been seen as heralding the start of a strong flow of primary issuance during the rest of 2017, only for a new political scandal to engulf president Michel Temer and throw investment banks’ pipeline plans into fresh doubt.

Atacadão was swiftly followed two days later by biotech firm Biotoscana – which priced at the midpoint of its range – and banks report a good pipeline with other companies close to issuing, including Omega Energia and reinsurer IRB.

Strong recent investment flows into emerging market (EM) equity – and Brazil in particular – have led to a strong performance in the asset class, and bankers are reporting keen interest from international investors for new Brazilian investment stories.

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