Bovespa – Brazilian exposure in the Sao Paulo account please

One of the most important stock market indices in Latin America and also in Brazil itself is the “Bovespa” or “IBovespa”. The Brazilian leading index is the oldest and best known index of the “ Sao Paulo Stock Exchange ” ( Bolsa de Valores de Sao Paulo ), which was founded in 1890 and is operated by “ B3 SA ” ( Brasil, Bolsa Balcao ).

Brazil is the largest country in South America in terms of area, with 8.516 million square kilometers, and the most populous country with around 217.240 million inhabitants. On September 7, 1822, Brazil gained independence from the former colonial power Portugal.

For many decades - even up until 1985 - the country was repeatedly subjected to autocrats, military governments and dictators. The constitution we know today has been in force since 1989 - Brazil is a federal, presidential republic (Republica Federativa do Brasil). The country has been plagued by allegations of corruption time and again. In more recent times, Luiz Inácia Lula da Silva led the government from 2003 to 2011, followed by Dilma Rousseff from 2011 to 2016, who was ultimately removed from office due to budget irregularities.

Michel Temer led the government for a relatively short period from 2016 to 2018, followed by the right-wing populist Jair Bolsonaro from 2019 to 2022, who was finally replaced by Luiz Inácia Lula da Silva, who has been in office since 2023.

Brazil's economy is expected to have grown by an estimated 2.9-3.0 percent in 2024. Inflation is expected to reach an average of 4.7 percent in 2024, and the key interest rate (Selic) of the Brazilian central bank Banco do Brasil was last at 11.75 percent.

According to forecasts by the central bank and a number of investment banks, Brazil's GDP growth in 2025 could be as low as 1.6 percent.

The weakening economy is also likely to have an impact on inflation, which is expected to average 3.8 percent. Significant interest rate cuts are not expected for the time being; experts are only expecting a base rate of 9.50 percent in 2006.

With the Bovespa Index, traders not only get the samba in the form of Brazilian exposure to the Sao Paolo stock market. In addition to the price risk related to the index, there is also a currency risk due to exposure to the Brazilian real. This should not be forgotten.

The leading index of the Brazilian stock exchange is the Bovespa Index, which consists of a total of 87 individual stocks that are traded on the stock exchange in Sao Paulo in the home currency, the Brazilian real (BRL). All securities are Brazilian stocks, which should not be particularly surprising for a Brazilian leading index.

The largest positions, i.e. the top 10 positions, are Vale do Rio Doce with an index weight of 11.96 percent, Petrobras (preferred shares) with a share of 8.21 percent , Itau Unibanco with 6.92 percent, Petrobras (common shares) with 4.97 percent, Banco do Brasil with 3.35 percent, WEG with a share of 3.26 percent, Banco Bradesco with 3.09 percent, Compania de Saneamento Basico with 3.03 percent, Eletrobras with 2.91 percent and Ambev with 2.67 percent. These top 10 stocks already have a total weighting of 50.37 percent.

The heavyweight in terms of sectors in the index is the financial sector with a share of 22.95 percent. The other places are followed by materials with a share of 17.44 percent, energy with 16.87 percent, utilities with 13.40 percent, industry with 9.43 percent, consumer staples with 9.00 percent, consumer discretionary with 3.15 percent, health with 2.76 percent, communications with 1.57 percent, real estate with 1.03 percent, IT with 0.78 percent and 1.62 percent in other areas.

( These data are as of the end of the month of November 2024 )

The analysis presented here is based on the daily chart using the CFD on the Bovespa Cash Index (Bovespa Cash Index), i.e. the “ Bra50 ”. In order to be able to define the targets for the bulls and bears more precisely, a Fibonacci analysis would be necessary.

This Fibonacci analysis could then be used with the help of the Fibonacci retracements and Fibonacci projections generated by the web-based trading platform “ ActivTrader ” to possibly derive the next targets for the top and bottom.

Starting from the last intermediate low of 122,855 points on August 5, 2024, which is relevant for the analysis, to the high of 137,840 points on August 29, 2024, the next resistance levels would be at 122,855 points (1.00%), 126,391 points (0.764%), 128,579 points (0.618%), 130,348 points (0.50%), 132,116 points (0.382%), 134,304 points (0.236%) and 137,840 points (0.00%).

The supports would be considered in the projections to the downside of 119,319 points (1,236%), 117,131 points (1,382%), 113,594 points (1,618%) and 111,406 points (1,764%). The three EMAs ( EMA50 in purple, EMA100 in blue and EMA200 in red ) were also added to the chart.

On the downside, the 1.618 percent Fibonacci projection of 111,594 points could be a possible target for the bears. On the upside, the bulls could target a target area at the 0.618 percent Fibonacci retracement of 128,597 points. Both price target areas are visualized here in the chart using the two rectangles ( the green rectangle serves to visualize the bulls' price target area, the red rectangle the bears' price target area ). At the time of this analysis, the Relative Strength Index was still in the neutral range on a daily basis at 35.66 points.

Source: ActivTrader

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