Dozens of new equity offerings have flooded the Brazilian market, but their performance belies any difficulty in absorbing the heavy supply.
In the first quarter of 2006, nearly $4 billion of new issues poured into the Brazilian equity market, versus less than $6 billion for the full year 2005, according to Merrill Lynch. The calendar of proposed issues filed with CVM, the Brazilian securities regulator, continues to grow.
Large inflows of foreign capital are offsetting the new supply, and the ongoing flow of funds is essential for the market to digest the upcoming offerings, Pedro Martins Jr., São Paulo-based Latin American strategist at Merrill Lynch (Brazil), said in a report.
The Brazilian stock exchange Bovespa had a net inflow of about $2 billion from foreign investors in the first quarter of 2006. The accumulated performance of Brazilian IPOs since 2005 is an average increase of 219%, beating the 83% gain in the Ibovespa index in the same period, according to Martins.
The top five best-performing equity offerings since 2005 are Cosan, Brazil’s largest sugar and ethanol producer; Cyrela Brazil Realty; fashion retailer Renner; Localiza, a car rental company; and Submarino, an online retailer.