Brazil is now the most favoured emerging market equity market

Chart of the Day: which emerging market to buy?

by Chris Marshall on Sep 13, 2011 at 15:36

http://www.citywire.co.uk/money/chart-of-the-day-which-emerging-market-to-buy/a523699?ref=citywire-money-latest-news-list

A surprise 50 basis point interest cut by Brazil’s central bank at the end of August set investors salivating: poised to pounce on the bruised, but cheap Bovespa stock market, they had just been waiting for a sign that inflation was really under control and that there would be no more rate rises to threaten economic growth.

As a result, Brazil is now the most favoured emerging market equity market, according to global fund managers surveyed by Bank of America Merrill Lynch. They increased their allocation to Brazil to the highest level since April, as shown on the chart below (not the difference between August and September).

Data from EFPR adds further evidence for this trend, showing that Brazil equity funds last week fell just short of posting inflows for the first time in six weeks.

The market still has a long way to go to regain the level where it started the year, and is still down 20%.

Of course like other economies the world over, Brazil is at threat from the problems facing the eurozone and US, but bears-turned-bulls on the country – a swelling breed – say that this will be offset by strong consumer growth. And debate remains as to whether inflation is really under control.

In total, the BoA Merrill Lynch survey showed that although fund managers went underweight to equities this month for the first time since May 2009, investors remain overweight to emerging markets.