In a bid to escape domestic disorder, Brazilian investors have upped their bets on locally-traded shares of Apple Inc., Netflix Inc. and GoPro Inc.
The total number of Brazilian Depositary Receipts traded increased by 104 percent this year through August 7, compared to the same period in 2017. Signs that the North American economy is in good shape, coupled with healthy corporate U.S. earnings and political uncertainty ahead of Brazilian elections in October are stoking investors’ appetite for BDRs, analysts said.
BDRs are becoming more attractive as the foreign exchange depreciates, Mauricio Ceara, a director at J.Safra Corretora said. In the second quarter, the U.S. economy accelerated at a pace of 4.1 percent, its fastest since 2014. Also helpful: “Most American companies listed here in Brazil have released above-the-expected earnings in the second quarter,” Ceara said.
BDR volumes may continue to climb with no clear presidential front-runner and the fate of Brazil’s fiscal reforms on the line, Pedro Galdi, an analyst at Mirae Asset Wealth Management said.
“As volatility endures in Brazil, investors are likely to keep looking to BDRs as an alternative,” Galdi said.
It’s not just election jitters driving investors to BDRs — interest rates are at historic lows.
“With the Selic rate at 6.5%, people search for alternative investments,” Bradesco Asset Management’s chief economist Marcelo Toledo said in a phone interview. The bank initiated what it says was the first fund of BDRs in the country in 2011.
As of August 7, the following companies had seen the biggest trading volume increase for the year: GoPro +106,800 percent; ABBVIE +7,940 percent; BNY Melon +5,400 percent; Ford +3,230 percent ; Cisco +2,270 percent. Netflix BDRs have climbed 107 percent year-to-date, and Apple BDRs are up 38 percent.
— With assistance by Erick Costa, and Felipe Saturnino
(Adds Bradesco comments starting in the sixth paragraph.)