For Brazil equities, possibly a case of too hot, too fast

Kenneth Rapoza – Forbes, 02/03/2012

The Bovespa trading floor. (Forbes)

Brazilian equities are on a tear lately, slowly recovering from the doldrums of 2011. Anyone who bought in at the end of the year can tap themselves on the back for impeccable timing. For those who think it’s time to jump in, a word of caution.

“The kind of jump we’ve seen in Brazilian stocks raises concern,” says Heiner Skaliks, portfolio manager at the Strategic Latin America Fund (SLATX). “The government is nervous and we’ve seen them come in and intervene in the market today for the first time since the summer. It makes me think that if the inflows push their currency too strong, they will reinstate the foreign transaction taxes that they removed last year,” he says.

Skaliks has “maybe 1%” of his fund in Brazilian equity. He prefers high yield dollar denominated Brazilian corporate debt.

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