* HSBC says current Bovespa loss longest in two decades
* Bovespa pricing attractive but overhang weighing down
SAO PAULO, April 18 The longest streak of losses
in Brazilian stocks in two decades is leaving share prices ripe
for a rebound, but investors are still concerned to jump in
because of concerns about high inflation, state interference in
some sectors and weak economic growth, HSBC Securities
strategists said on Thursday.
The current correction cycle, which has lasted 15 weeks,
pushed the benchmark Bovespa stock index down 16
percent, below the average 22 percent drop for the 19 overall
market declines on record since 1993, strategists led by Ben
Laidler said in a note. During that period, downturns lasted
only seven weeks in average.
The numbers could suggest that either the current correction
still has some room to go, or that buyers at this point could
reap fat rewards when the market recovers.
Even as the cycle looks poised to go positive, meaning that
the Bovespa could at some point reverse the current losses, the
structural problems afflicting Brazil's equity market could
persist, the note said.
According to Thomson Reuters data, Brazil is currently the
world's worst-performing stock market so far in 2013. Even with
the Bovespa shedding 14 percent of its value since the start of
the year, the market is trading at about 11 times estimates
earnings - suggesting that valuations have remained resilient.
"This correction has, unusually, been driven more by
domestic Brazil policy concerns than by external volatility,"
Laideler and his team said. "Brazil remains a counter-consensus
cyclical story to own, in our view, even if the structural story
is very difficult."
The report highlights the delicate balancing act facing
investors in Latin America's largest economy, where sentiment
remains weak after two years of below-trend growth, signs of
fatigue in the government's growth model and rising regulatory
noise in a number of industries. Investment inflows into the
stock market, however, remain strong due the nation's status as
an emerging economic powerhouse that is home to about 200
The index seesawed on Thursday, and was largely flat at
52,860.35 at noon local time (1500 GMT). The Bovespa has fallen
for four of the past six sessions.
This year's tumble in the Bovespa, where commodities-related
stocks represent more than half the index, has been exacerbated
by a global rout in oil, energy and mining stocks. Brazilian
equity markets have over the past few years become more
correlated to China, Brazil's largest trading partner and the
buyer of most of its food and mineral exports.
According to Laidler and his team, Brazil stock market
investment sentiment should improve as a mild economic recovery
is underway and a year-long decline in earnings expectations
began to stabilize recently.
(Reporting by Guillermo Parra-Bernal Editing by W Simon)