Investors ought to maintain exposure to Brazilian shares that
help them hedge against policy uncertainty and inflation or pay
high dividends, analysts at Bank of America Merrill Lynch said
on Friday. A basket of so-called defensive stocks in sectors
such as utilities and commercial property has outperformed the
benchmark Bovespa stock index by 14.5 percent, despite
concerns on higher interest rates.
Combining implied rates of returns with stock performance,
shares of shopping mall operator BR Malls SA and
property company BR Properties SA "screen positively
as stocks to add exposure to the defensive sector in Brazil,"
strategist Felipe Hirai wrote in a client note. Teléfonica
Brasil SA and Cia Energetica de Minas Gerais SA
are also expected to pay dividend yields above
average borrowing costs in Brazil, Hirai added.
According to Hirai, investors should add exposure to both
companies since their stocks are down 11.5 percent and 13.5
percent this year, respectively, mostly on "concerns of higher
rates, vacancies and weaker Brazilian consumers, and now imply
an internal rate of return of 12 percent to 14 percent, compared
with average 10 percent for the utilities sector," the note