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Pandemic hastens Brazil’s financial shift

Collapse in Brazilian equities places a question mark over recent growth in retail investment.


Some Brazilian bankers have asked if large drawdowns would inflict psychological damage on retail equity investors. This is important, as the growth of retail had offset this year’s capital outflows from international investors.

Local banks now dominate new deal bookrunning mandates because they now control the most important sources of demand.

The online brokerage business XP Inc took advantage of this to claim the lead on the IPO for BMG bank last year – the first time a new bank had won such a role in 17 years.

Not only were there no large-scale redemptions, the leading Brazilian equity managers raised billions in hours. Dynamo, for example, attracted R$1 billion ($176 million) for its Cougar fund within a day.

If anything the falls in equity prices have spurred greater appetite – the B3 stock exchange says 400,000 individuals have opened accounts in the last two months. May’s Estapar IPO saw 20% of orders come from the retail investor base.

Negative rates

The main reason why demand for equities has proved to be so resilient is that fixed income rates are at unprecedented levels.

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