Brazilian stocks plunged 51% in the January-March period measured in dollar terms, making the benchmark Bovespa index the world’s worst-performing major equity market in the first quarter, according to Reuters/Refinitiv calculations.
The extraordinary fall was down to a double-whammy of heavy selling, along with markets around the world as the hit to growth and earnings from coronavirus became apparent, and a 22% fall in the real’s exchange rate.
The collapse in oil prices also played a part in the Bovespa’s performance, as preferred shares in oil giant Petrobras sank 56% in the first quarter. And that was in local currency terms.
In local currency terms, the benchmark Bovespa index closed the month of March down 30%, the biggest monthly fall since August 1998. It fell 37% over the first quarter period, its steepest quarterly plunge since at least 1994.
The second-biggest declining equity market was Argentina’s, which fell 46% in dollar terms, followed by Greece, according to Reuters/Refinitiv calculations.
The Bovespa closed 2.1% lower on Tuesday at 73,086 points.
The real, supported by a $755 million sale of spot market dollars at auction by the central bank, closed at 5.1950 per dollar, meaning it depreciated by 22.5% in the first quarter of the year.
That marks the currency’s biggest quarterly fall since 2002, and there might be even further to go.
“In a worst-case scenario where current account funding dries up for a long time, most deficit currencies still have major downside,” Bank of America Merrill Lynch analysts wrote in a note on Tuesday.
“For example, the Brazilian real … would need to be another 20% cheaper to balance (the) current account,” they said.
The central bank has now sold over $12 billion in spot market intervention currency auctions so far this year, and has also sold dollars via FX swaps and credit line auctions.
Reported by Jamie McGeever