The Brazilian Stock Market Performance, 2009

A calendar year is to some extent an arbitrary period of time in reviewing economic

trends. For instance, the Brazilian stock market grew by 82.7% in 2009 using the
Ibovespa as our guide. If we had chosen a 15 month period, growth would have been
closer to 40%. However, a year end is an accepted point of time in which we can review
comparative performance and arrive at some conclusions.

Figure 1.
Stock Market Performances, 2009

200%
180%
160%
140%
120%
100%
80%
60%
31

31

28

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30

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30

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30

31
/1

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DJI 00 FTSE CAC 40 ^HSI IBOV S&P500

20

20

20
20

00

00

00

00

00

00

00

00
08

09

09

09
9

Source: Yahoo Finance

As seen previously in this blog, the Brazilian stock market fell earlier (starting in June
2008) and farther than any other of those under discussion here, and thus the
recuperation from these lower numbers contributes to some extent to the exaggerated
2009 performance of 82.7% growth. (The starting number used was the closing index of
Bovespa for 12/30/2008.) To make the performances comparative we have taken the
last index for each market for 2008, and called it 100%.

Figure 1 shows that the two emerging market indices, i.e. Ibovespa and the Hang Seng
(52%, 2009 growth) vastly out performing the indices of the USA (The DJI and S&P)
the UK (FTSE) and France (CAC 40). Indeed, the range of growth of the more
established markets was 19% for the DJI, to 23% for the S&P. The two other indices
grew by 22%.

By any standard the Brazilian performance was outstanding, and ultimately

demonstrated a confidence on the part of investors in Brazil that has come to show itself
in less quantitative areas such as diplomacy and politics.

However, we believe this confidence continues to be shown in the Brazilian stock

market even though the Brazilian government has taken steps to discourage foreign
sources of liquidity via taxation. (In October the government imposed a tax of 2.0% on
foreign investment capital entering the country for the purposes of stock market or fixed
income investments. In November the government extended this fiscal deterrent to
purchases of Brazilian shares on stock markets outside Brazil, although limiting the tax
to 1.5% of the purchase value.)
Figure 2.
Stock Markets Performances, October 20th - December 31st,
108,0% 2009
106,0%
104,0%
102,0%
100,0%
98,0%
96,0%
94,0%
92,0%
90,0%
20

27

10

17

24

15

22

29
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09

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9

9
DJI FTSE CAC HSI IBOV S&P

Source: Yahoo Finance

Figure 2 shows the performance of these same stock markets since the inception of the
Brazilian tax on foreign investment, on October 21st, which = 100% for all markets. As
of year-end we see that Ibovespa had increased in value by 5% during this period, more
than any of the other stock markets. The DJI grew by 4.2%, the FTSE by 3.2%, the S&P
by 2.2% and the CAC 40 by 1.7%. The Hang Seng actually declined in value over this
period by 2.3%.

Thus, we can see that the rate of growth of value of the Brazilian stock market has
declined somewhat since the inception of the tax, but the performance continues strong.

Month-end numbers from Bovespa concerning stock market investors will be available
tomorrow and we will post our analysis then.