2002 accurately predicted that Brazil bulls: Investors in emerging market bearish sentiment is too thick

Updated: October 20, 2015  Views: 2

FX168 hearing Tuesday (October 20 famous foreign media reports that the sell-off in recent months against the Brazilian market was not intimidated by Jerome Booth, which represents and previous experience makes no difference, the market sentiment is far too far .Jerome Booth incumbent New Sparta Asset Management chairman, Booth 2013 after leaving Ashmore created this company.

Booth said, 'Brazil does have serious problems in this country is currently described as 'a mess', the state-owned Petrobras is facing a large-scale corruption investigations, worsen the state's financial outlook, into 25 years of the most severe economic recession, and the political system fragmented urgently needed reforms are not implemented, not to mention the credit rating was lowered to junk status, as well as the Brazilian real tumbled to a record low. '

Booth said in an interview in New York, but the Brazilian government will not default, politicians will eventually find the will to promote economic growth, improve budget and restoration measures. Investor panic over, just 13 years ago, but because of market concerns about the presidential election The leading candidates will protest government bonds, bond prices as the currency plummeted .Booth research director at the time, but any Ashmore Investment Management, the company was one of the largest holders of dedicated emerging market sovereign bonds.

Booth said that at present Brazil is the typical 'dead end' situation, but all the risks are reflected in the current price being.

Booth pointed out that Brazil's overseas bonds this year, investors have lost 8.3 percent, close to the bottom. More than 60 emerging markets tracked by JPMorgan index, only the rate of return is lower than Brazil in Zambia in the past three months, Brazil's sovereign rating After being down three times, one of which led to the loss of investment-grade rating in Brazil, the government will implement 'appropriate economic plan' and restore investor confidence.

Even in BlackRock, Federated Investors Inc and RBC Capital Markets believe that Brazil should avoid the occasion, it is what makes Booth so confident?

Booth believes because most investors have overestimated the risk, the same as in 2002, when presidential candidate Luiz Inacio Lula da Silva in the presidential election opinion polls ahead, leading the Brazilian market suffered a sell-off in the presidential election before the market was worried about this former trade union leader and founder of the Workers' Party will announce the Brazilian debt is not legitimate. Observers worry out of Brazil in the aftermath of hyperinflation and political instability, becoming the world's developing countries, the most dazzling star just ten years, it will fall into decline reverse the trend.

Affected by this, the Brazilian real fell to historic lows, the average yield of Brazilian bonds break 25%, the benchmark index fell 40 percent before the election.

Booth said, 'hedge fund at that time that it was a self-fulfilling prophecy, they understand one thing: If all counterparts in New York are bearish, then Brazil 'will be the downfall,' I think this is nonsense.'

In fact, with Lula wins, the investors get a return from his start in 2003 came to the end of 2010 stepped down, the dollar return of Brazilian debt was 256 percent, more than twice the average of emerging markets. Real return bonds dollar equivalent of 520%, which is nearly three times the average of similar countries. Real against the US dollar rose nearly doubled, the stock market rose 500%.

2002 Brazil bullish, Booth funds invested in Brazil, this time he did not invest in the Brazilian market.


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