by Brett Flynn / October 13, 2014
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Brazilian stocks trading in New York plunged Friday as the Ibovespa dropped the most among global stock indexes after polls showing opposition candidate Aecio Neves tied with President Dilma Rousseff before this month’s runoff disappointed investors betting on the incumbent’s defeat.
Rousseff and Neves are statistically tied before the Oct. 26 runoff, according to separate polls from Datafolha and Ibope published last week.
Surveys by the Ibope and the Datafolha pollsters both showed Neves with 51 percent of valid votes against Rousseff with 49 percent, statistically tied within the polls’ margin of error.
Some investors were betting Neves would come in stronger after an initial survey published by a less renowned institute earlier this week showed him as the clear front-runner in the presidential race.
“Yesterday we heard rumors that Aecio would be leading by 7 percentage points,” said Arlindo Sa, chief of treasury at Icap brokerage in Brazil. He added that the international scenario “wasn’t helping either.”
“Investors were probably too optimistic about the chances of Aecio being ahead of Dilma in these polls,” Joao Pedro Brugger, who helps manage 520 million reais at Leme Investimentos, said by phone from his office in Florianopolis, Brazil. “That helps explain why markets are lower today.”
Brazil’s benchmark equity index has rallied 23 percent since this year’s low in March on speculation a change in government will reduce intervention in the economy, boost growth and slow inflation.
“Many Brazilians with low expectations of politicians feel like they’re actually getting something out of government under the PT — higher income, housing, health,” Troyjo said by phone from Rio de Janeiro. “Reminding voters of that may still work. Dilma still has a chance.”
While investors will be paying close attention to opinion polls in the next few weeks, analysts warned that they should be careful in interpreting the data.
“First bear in mind that polls failed miserably to predict the first-round results,” Marcelo Carvalho, an economist with BNP Paribas, wrote in a research note. “Be careful in extrapolating near-term trends,” he added.
Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL), Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR), TIM Participacoes SA (ADR) (NYSE:TSU) and BRF SA (ADR) (NYSE:BRFS) all saw noteworthy declines on election news.
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