Brazilian shares closed lower on Monday, giving up initial gains, after former army captain Jair Bolsonaro was elected president of the largest economy in Latin America.
The iShares MSCI Brazil ETF (EWZ), a U.S.-based exchange-traded fund that tracks Brazilian stocks, fell 3.5 percent after rising as much as 3.4 percent. The Bovespa index, Brazil's main stock-market index, dropped 2.4 percent and gained as much as 3 percent.
Far-right candidate Bolsonaro obtained 55 percent of the vote in Sunday's contest, defeating leftist Fernando Haddad. Bolsonaro's rise to power comes after his promises to eradicate corruption from Brazil's government and to rein in a rising crime rate.
However, Bolsonaro's capacity to lead Brazil has been questioned by many given some of his comments. He told Playboy in 2011 he would rather have a dead son than a gay son. He has also said Haitian immigrants were bringing diseases to Brazil.
"Many in Brazil worry about his brash and sometimes controversial personality, drawing parallels with the behaviour and rhetoric of Presidents Trump and Duterte," said Rafael Elias, an analyst at Exotix Research. "But we are of the view that he will be more pragmatic than widely expected, and careful not to alienate sections of society. We believe that he is well aware that he will need to promote and facilitate consensus to make progress with his government program.
Investors have been cheering Bolsonaro's victory as they see his presidency as the best chance for Brazil to enact pension reform. The country's pension system has contributed to a ballooning fiscal deficit, which surged to 8 percent of GDP last year from 3 percent in 2013.
EWZ and Bovespa are up 14.5 percent and 5.4 percent this month, respectively.
"Now that Brazil has a new leader, the most important objective is now to get its country's finances in line," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. "Pension reform was the initiative that [current President Michel] Temer was not able to pull off and hopefully Bolsonaro can get a fighting chance to do so."
Bolsonaro also said throughout his campaign he wants the Brazilian central bank to be more independent and to privatize state-run companies.