Symbol: ENO.BR

LATAM Weekly Summary

Posted on by Romeo Alvarez

Key points from this week’s report:

Please refer to the attached PDF for the full report.

 

  • Brazil’s Bovespa benchmark declined 3.1% last week. The Brazilian market was moved back to a Downtrend from a Rally Attempt as it made 52-week lows. We recommend that clients continue to take a defensive approach.
  • Mexico’s benchmark index was down 1.2% last week. The Mexican market was moved to an Uptrend Under Pressure from a Confirmed Uptrend. It has five distribution days.
  • There were no changes in the Focus List. Only one stock remains Focus List-rated: Totvs (TOT.BR; TOTS3:BZ).
  • Stocks of interest include Telefonica Brasil (TEE.BR; VIVT3:BZ), Energias do Brasil (ENO.BR; ENBR3:BZ), JBS (JBS.BR; JBSS3:BZ), Marfrig (MFA.BR; MRFG3:BZ), Sao Martinho (SAO.BR; SMTO3:MM), Alfa (AFA.MX; ALFAA:MM), Arca Continental (ARC.MX; AC*:MM), and Grupo Aeroportuario del Sureste (AUS.MX; ASURB:MM). Additional names are listed on page 3.

LATAM Weekly Summary

Posted on by Romeo Alvarez

Key points from this week’s report:

 

Please refer to the attached PDF for the full report.

 

  • Brazil’s Bovespa index gained 3.1% last week, closing at an all-time high on optimism over the approval of President Bolsonaro’s pension reform bill. The Brazilian market remains in a Confirmed Uptrend with only two distribution days.
  • Mexico’s benchmark gained 0.6% last week and is trading at its 50-DMA. The market remains in a Rally Attempt.
  • Last week, we added Natura Cosmeticos ( NAT.BR; NATU3 BZ ) and Iguatemi ( IGU.BR; IGTA3 BZ ) to our Focus List, increasing the total number of recommendations in LATAM to 12.
  • Actionable Focus List recommendations include Iguatemi (IGU.BR; IGTA3 BZ). Off the list, stocks of interest include Odontoprev ( ODO.BR; ODPV3 BZ ), TOTVS ( TOT.BR; TOTS3 BZ ), Energias do Brasil ( ENO.BR; ENBR3 ), Cia. Energetica de Sao Paulo ( CNB.BR; CESP6 BZ ), and Grupo Aeroportuario del Centro Norte ( OMA.MX; OMAB MF ).

 

LATAM Weekly Summary

Posted on by Romeo Alvarez

Argentina: Uptrend Under Pressure
Brazil: Uptrend Under Pressure
Mexico: Downtrend
Commentary
Brazil’s main equity benchmark rose 0.8% last week and found support near the 50‐DMA. Last week was short due to Brazil’s
Carnival holiday and trading started only on Wednesday. Due to the elevated number of distribution days (seven) and the lack of
new breakouts in leading stocks, we recently moved Brazil’s market to an Uptrend Under Pressure from a Confirmed Uptrend.
Brazil’s stocks were under pressure last week on concerns over how much lawmakers may water down President Jair
Bolsonaro’s proposed pension system reform. Bolsonaro warned the country cannot take all year to vote on pension
reform, and that not addressing the biggest threat to public finances could lead to economic turmoil. The Economy Ministry
noted last month that leaving the pension system as is could trigger a recession starting in H2 2020.
Brazil’s economy grew just 0.1% in the fourth quarter of 2018 from the prior quarter. The quarterly expansion of Brazil’s
GDP was below the 0.2% median estimate in a Reuters poll of economists. The third quarter GDP figure was revised down
to 0.5%, from a previously reported 0.8%.

LATAM Weekly Summary

Posted on by Romeo Alvarez

Argentina: Confirmed Uptrend
Brazil: Uptrend Under Pressure
Mexico: Rally Attempt
Commentary
Brazil’s main equity benchmark advanced 0.37% last week and remained above key levels of support. However, due to the
elevated number of distribution days (

) and the lack of new breakouts in leading stocks, we recently moved Brazil’s market to
an Uptrend Under Pressure from a Confirmed Uptrend. Although Brazil continues to be one of the best emerging markets
globally, many leading names are now extended from proper buy points or are in the process of forming new bases. We believe
the Bovespa benchmark might test support at the rising 50‐DMA before breaking into all‐time highs again (>100,000 level).
Leading sectors are those with direct exposure to the domestic economy, including Transportation, Health Care, Utility, Financial,
Retail, and Consumer Cyclical. The Utility sector is currently the absolute best sector in Brazil, mostly due to the expectations of
industry privatization. Conversely, Basic Materials is the worst performer in Brazil’s market.

LATAM Weekly Summary

Posted on by Romeo Alvarez

Argentina: Confirmed Uptrend
Brazil: Uptrend Under Pressure
Mexico: Confirmed Uptrend
Commentary
Last week, Brazil’s main equity benchmark fell 2.62% after advancing for six consecutive weeks. Due to the elevated number of
distribution days and the lack of new breakouts in leading stocks, we moved Brazil’s market to an Uptrend Under Pressure from a
Confirmed Uptrend. Although Brazil continues to be one of the best emerging markets globally, many leading names are now
extended from proper buy points or are in the process of forming new bases. We believe the Bovespa benchmark is poised to
test support at the 50‐DMA or ~91,800 level on profit taking. Leading sectors are those with direct exposure to the domestic
economy, including Transportation, Health Care, Utility, Financial, Retail, and Consumer Cyclical. The Utility sector is currently
the absolute best sector in Brazil, mostly due to the expectations of industry privatization.

LATAM Weekly Summary

Posted on by Romeo Alvarez

Argentina: Uptrend
Brazil: Uptrend
Mexico: Uptrend
Commentary
Last week, Brazil’s main equity benchmark gained 0.2% and advanced for a sixth consecutive week. The index managed to record a gain despite a large drop in shares of index heavyweight Vale (‐18% last week). Although Brazil continues to be one of the best emerging markets globally and leading growth ideas continue to trade in a positive manner, many leading names are now extended from proper buy points. Avoid chasing extended names. Leading sectors are those with direct exposure to the domestic economy, including Transportation, Utility, Financial, Retail, and Consumer Cyclical.

LATAM Weekly Summary

Posted on by Romeo Alvarez

Argentina: Uptrend Under Pressure
Brazil: Uptrend
Mexico: Uptrend

Last week, Brazil’s main equity benchmark gained 1.64% and advanced for a fifth consecutive week. Brazilian equities continue to trend higher on expectations that President Jair Bolsonaro will pass measures to reduce crime and government involvement in the economy. The country’s new Economy Minister Paulo Guedes promised to lessen the government’s outsized role in the economy, cut Brazil’s tax burden, carry out privatizations, and reduce the government’s deficit. Leading sectors are those with direct exposure to the domestic economy, including Transportation, Utility, Financial, Retail, and Consumer Cyclical. Leading growth ideas continue to trade in a positive manner, but many are now extended from proper buy points.