Hot market lures new generation of Brazil investors

By Stuart Grudgings

RIO DE JANEIRO (Reuters) - When Paolo Portinho meets up with his musician friends for a night out in Rio de Janeiro, they jam a few tunes and knock back some beers -- but only after having a serious talk about the stock market.

Brazilians' long-held suspicion of stock investment, born out of years of rampant inflation and economic instability, is evaporating in the face of a Sao Paulo market that has more than tripled in 4 years on the back of a booming economy.

The number of individual investors in Brazil has risen six-fold in the past five years and more than doubled since 2006 to nearly 490,000. In 5 years, the daily amount they trade has soared to 1.8 billion reais ($1.1 billion) from 120 million reais ($73.6 million).

At a time when many Americans and Europeans are fretting over their jobs and houses as recession looms, magazine covers here are full of pictures showing grinning investors being showered in cash from their stock market exploits.

Despite a pullback in recent days, the market's Bovespa index is up 1 percent this year, compared to a 44 percent surge in 2007.

That compares to a 10 percent fall in the U.S. Dow Jones index and double-digit losses in several major European stock markets.

"I've been trading stocks since I was 18 but I never saw anything like this," said Mauricio Bastter Hissa, a 44-year-old who has written several best-selling books on investing here.

Hissa, a triathlete often found walking his German Shepherd dog near Rio's Leblon beach, gave up his job as a doctor last year to meet growing demand for his workshops and investment advice on his website.

Brazilians, many of them with spare income to invest in stocks for the first time, are signing up in droves to sites like Hissa's and brokerages with Internet trading sites such as Agora (click on www.agorainvest.com.br), and independent brokerage Spinelli (click on www.spinelli.com.br).

"Almost all of the old broker firms are going into the Internet business," said Portinho, 35, who heads the National Association of Investors (INI) in Rio and plays guitar when he meets fellow members of his investment club.

"They should be, because home brokers are a fever among Brazilian investors." Home brokers is the Brazilian term for Internet trading sites.

VULNERABLE TO DOWNTURN?

That is prompting industry change as banks seek to expand their brokerage business.

Banco Bradesco, Brazil's largest private bank, bought Rio de Janeiro-based Agora in April for $494 million, picking up its 29,000 active clients. Banco Fator, one of Brazil's last independent investment banks, has said it is scouting 4 or 5 brokerage investment targets in the expectation that share trading will surge in the years ahead.

Brazil's attainment of investment grade status in April -- a recognition of the emerging giant's growth prospects and debt reduction -- spurred another surge of investor interest.