Morgan Stanley and JPMorgan upgraded Brazilian equities to Overweight after right-wing Senator Flavio Bolsonaro outperformed polls in the first round of the presidential election. Bolsonaro took 47% of the vote against 45% for President Luiz Inacio Lula da Silva, setting up a runoff later this month, and MSCI Brazil rallied about 13% on Monday. Morgan Stanley strategists still see further upside of roughly 10% in equities and 10% in the currency by year-end as risk premiums decline, and the team led by Nikolaj Lippmann added beta to the bank's Brazil and Latin America model portfolios. Morgan Stanley sees additional demand of $30-40 billion from local investors, $10-20 billion from emerging-market funds and $30-40 billion from global funds against a free float of about $500 billion, and it favors financial services and utilities while staying overweight energy, minerals and hardware. JPMorgan, which had downgraded Brazil to Neutral earlier this year, also upgraded it back to Overweight, expecting MSCI Brazil to gain 12% immediately and reach about 20%, with strategist Emy Shayo Cherman saying that is better upside than any other Latin American market offers; the bank funded the move by cutting Chile to Neutral.
Morgan StanleyMorgan Stanley upgraded Brazil to Overweight and added beta to its model portfolios, a strategy call rather than a company-specific event.
MSCI Inc
JPMorgan Chase & CoJPMorgan upgraded Brazilian equities back to Overweight, but this is a market call, not a company-specific development for JPMorgan itself.
