The MSCI Brazil rallied close to 7.5 percent last month, beating MSCI Emerging Markets by 3 percent. UBS said that that, "Forward earnings have increased by 8 percent since the lows in February [this year]", and signs continued to be positive. According to UBS, positioning is still low in Brazil, but it anticipated further inflows, some of which are already beginning to come from stock flotations and merger and acquisitions.
The UBS report considered the risks to Brazil to include an ultimately weak domestic macro environment, the Petrobras investigation and potentially less flexible monetary policy from the U.S. Federal Reserve and European Central Bank. But, UBS added that positive trends in Brazil's economy should weather these potential storms, and reflecting this, Brazilian assets had served as an unlikely safe haven since Brexit.
As for the Rio Olympics starting Friday, UBS acknowledged that "In the vast majority of cases, the games are a money-losing proposition for host cities," a trend which worsens for developing nations in comparison to their industrialized counterparts. The Rio games are a hefty investment for Brazil, costing over $10 billion, but look unlikely to set the country apart from this trend, even when long term benefits are considered.
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