Brazil Olympics "cherry on cake" for stocks
NEW YORK (Reuters) - Brazil's winning bid to host the 2016 Olympic Games could attract an even larger number of foreigners to Brazilian stocks, which have already soared 62 percent since the beginning of the year.
News that Rio de Janeiro defeated Chicago, Madrid and Tokyo in a competition to host the games boosted shares of infrastructure and tourism-related companies on the Sao Paulo Stock Exchange on Friday.
Though Fund managers do not expect the benchmark Bovespa index .BVSP to rally much further in the short term, they see the Olympic games keeping a positive bid in the market.
"Brazil has had a pretty good run-up year to date as it is. This is the cherry on top of the cake," said Ed Kuczma, investment analyst with New York-based fund manager Van Eck Global.
Kuczma, whose firm manages an exchange-traded fund (ETF) dedicated to small- and mid-sized Brazilian companies (BRF.P), noted the Olympic news followed last week's upgrade of Brazil's credit ratings by Moody's, which opened the country to more conservative institutional investors.
Growth forecasts for Latin America's largest economy are also on the rise.
The International Monetary Fund this week said it now expects the economy to grow 2.6 percent next year -- 0.3 percentage points more than it expected just three months ago.
A much more bullish Merrill Lynch on Friday revised its 2010 gross domestic product forecast for Brazil to 5.3 percent from a previous estimate of 4.5 percent.
Higher growth rates in emerging economies make them a must-have for foreign investors seeking higher returns, said Richard Kang, chief investment officer and director of research at Emerging Global Advisors, which manages a series of ETFs with exposure to Brazil.
"And any time they hear some of that news, such as Olympics to Brazil, these are influential stimulus to get people into thinking: 'Just another reason for me to get out there,'" he said.
INFRASTRUCTURE, TOURISM
While the overall stock market may benefit from increased foreign investor interest in Brazil, companies related to the infrastructure and tourism sectors are the obvious winners.
Steel makers such as Gerdau (GGBR4.SA) and real estate developers such as Cyrela (CYRE3.SA) and Gafisa (GFSA3.SA) led gains on Friday following the Olympic news.
Van Eck's Kuczma said Brazilian airlines, such as Tam (TAMM4.SA) and Gol (GOLL4.SA) could have their earnings estimates upgraded by analysts on expectations of increased tourist inflows.
The same inflow of foreign visitors should boost prospects for companies such as car rental Localiza (RENT3.SA) and airport retail firm Dufry (DUFB11.SA), he added.
(Editing by Andrew Hay)
