Investment in Brazil 'stays strong'
Date added: 6th July, 2010 at 14:39
(view all articles from July, 2010)
Categories: Economy
Those looking to invest in property in Bahia may be interested to know that Brazilian stocks performed well this year, according to one commentator.
Writing for USA Today, John Waggoner said that despite financial problems in more developed countries, stocks in emerging markets have not fallen as much as expected.
Typically, trends in more advanced economies are followed by countries like Brazil, as they tend to trade items such as commodities and manufactured goods to the world's leading nations.
Therefore, when demand drops due to the poorer health of developed markets, emerging economies tend to go down with it, he explained.
However, this year companies based in smaller countries have fared better than they usually would during a time of slowed growth in the West.
Mr Waggoner cited Lipper as revealing that the average stock fund decreased by 10.3 per cent in the second quarter and fell 5.7 per cent over the year.
Despite this, funds investing in developing economies declined by only 5.9 per cent this annum and nine per cent in the past three months.
Alec Young, market strategist for Standard & Poor's, told the journalist: "The long-term story is best in emerging markets," explaining that the stronger-than-expected performance of the stocks during a time of investor uncertainty indicates the increasing maturation of the nations' economies.
One of the drivers of growth in Brazil and other developing countries is a low level of debt, which Mr Waggoner attributed to a restructure following the 1998 currency crisis.
Another is the strong expansion of earnings, outpacing the developed world, while domestic growth has seen a rise in salaries, which has pushed demand for consumer goods such as cars and potentially lifted property purchases within affordable housing schemes.
Indeed, the Instituto Brasileiro de Geografia e Estatistica (IBGE) recently reported that the average monthly income in the country had risen by 2.3 per cent between March and April, while real estate developer in the nation PDG Realty and rival Agres merged as they were boosted by strong economic growth, according to Reuters.
Mr Waggoner revealed that stocks in emerging markets are currently selling for 11.5 times earnings, cheaper compared with companies based in the US where they trade for 12.8 times the firm's income.
This is normal, the commentator said, citing Mr Young, but if the economy in Brazil continues to exceed growth in more developed nations, stocks are going to look inexpensive.
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