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Gol: Planning share buyback |
Investment banks say the recent US Fed rate cut, coupled with strong domestic fundamentals, bodes well for Brazilian capital market investors. “Fed easing since mid-August has opened up a new leg of the bull market in Latin American equities, especially in Brazil,” says a Citi report. “Brazil’s huge rally to a new Bovespa high above 61,000 leaves equities expensive on most traditional valuation measures, but still slightly inexpensive relative to bonds,” adds the report, noting valuations are not yet a reason to sell.
Other investment banks agree with Citi’s bullish outlook. Credit Suisse predicts investments in Brazilian securities will hit record highs this year, with equity investments rising to $17.8 billion from last year’s $7.7 billion. The bank estimates fixed-income sales will rise more moderately to $33 billion, compared with $32.8 billion in 2006.
A statement in a regulatory filing by Fundação Asas indicates that the foundation, which controls a 69.6% stake in Brazil’s Gol Linhas Aéreas Inteligentes, the country’s second-largest air carrier, is considering a share buyback that could cost some $1.5 billion. The foundation, which manages the stake on behalf of the local Constantino family, which founded the profitable low-cost airline, would then proceed to de-list the company in São Paulo and New York. Speculation over the potential buyback drove up Gol share prices, which had lost nearly 50% of their value over the past year.
Banco BMC is the most recent member of the exclusive club of Brazilian investment-grade-rated companies. Fitch upgraded the bank’s long-term rating to BBB- from B- after its sale to Bradesco, the country’s largest private financial group. Banco BMC will continue to operate as a separate entity focused on personal consignment loans, vehicle financing mainly for trucks, and loans to small and medium-size businesses, while receiving support from its new parent.
Other investment banks agree with Citi’s bullish outlook. Credit Suisse predicts investments in Brazilian securities will hit record highs this year, with equity investments rising to $17.8 billion from last year’s $7.7 billion. The bank estimates fixed-income sales will rise more moderately to $33 billion, compared with $32.8 billion in 2006.
A statement in a regulatory filing by Fundação Asas indicates that the foundation, which controls a 69.6% stake in Brazil’s Gol Linhas Aéreas Inteligentes, the country’s second-largest air carrier, is considering a share buyback that could cost some $1.5 billion. The foundation, which manages the stake on behalf of the local Constantino family, which founded the profitable low-cost airline, would then proceed to de-list the company in São Paulo and New York. Speculation over the potential buyback drove up Gol share prices, which had lost nearly 50% of their value over the past year.
Banco BMC is the most recent member of the exclusive club of Brazilian investment-grade-rated companies. Fitch upgraded the bank’s long-term rating to BBB- from B- after its sale to Bradesco, the country’s largest private financial group. Banco BMC will continue to operate as a separate entity focused on personal consignment loans, vehicle financing mainly for trucks, and loans to small and medium-size businesses, while receiving support from its new parent.
Antonio Guerrero
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