65535
Brazil Investors Can Seek Options Markets
Brazil Investors Can Seek Options Markets

Brazil Investors Can Seek Options Markets

Brazil Investors Can Seek Options Markets

Investors are fleeing Brazil, yet option prices indicate that Latin America’s biggest economy should still be able to implement reforms that will benefit growth despite a corruption scandal that has ensnared President Michel Temer.
The benchmark Bovespa index of stocks slumped 8.8% following a May 18 report that Temer condoned a deal to pay the jailed former House Speaker Eduardo Cunha to not testify in the country’s biggest graft probe, Bloomberg reported.
The benchmark’s biggest one-day drop since the 2008 financial crisis came amid heightened uncertainty and concern that Temer’s implication in the scandal would prevent him from instituting a program of reforms considered critical to lifting Brazil out of a two-year downturn that saw the economy shrink 3% last year.
Leading lawmakers and a third of Temer’s cabinet have been implicated in the Operation Carwash scandal, which has uncovered systematic bribery of public officials in return for contracts with state-owned and private companies.
The Bovespa is little changed since the news emerged and options prices suggest the worst is over for the country in terms of damaging corporate and political revelations. More specifically, options prices on the Bovespa stock index indicate that the potential for the country’s equities outweigh the risk. In other words, the options market predicts that investors will receive more upside for the amount of downside risk they bear, making for an attractive investment.
Much like a corporation that recovers after revealing a slew of damaging news in one fell swoop—a so-called big-bath write-down—Brazil may now be in a position to focus on its problems, rather than ignore them, and implement the changes necessary to restore growth and the integrity of the political system.
Shares in Royal Dutch Shell Plc climbed 35% in 14 months after it took an $8.2 billion charge in October 2015 because of failed exploration projects in Alaska and elsewhere. Volkswagen AG has become the world’s biggest carmaker by volume and its shares advanced 23% in two months after it took a $7.5 billion write down, also in October 2015, following an admission that it had cheated on emissions tests for diesel vehicles.

Short URL : https://goo.gl/7BmYX5
  1. https://goo.gl/xO5DaG
  • https://goo.gl/ZBC2QG
  • https://goo.gl/R1Sqok
  • https://goo.gl/D3ZPwy
  • https://goo.gl/ydVPL9

You can also read ...

Philippines May Suspend Excise Taxes on Petroleum Products
The Philippine government will suspend the collection of...
Jordan Approves New IMF-Guided Tax Law
Jordan’s cabinet on Monday approved major IMF-guided proposals...
At present, the majority of investments are still being done in oil-gas and traditional industries while there is still almost no SME sector in the country.
While Saudi Arabia’s latest budget figures show progress in...
US, China are nearing a deal to remove American sales ban against ZTE.
US President Donald Trump retreated from imposing tariffs on...
Dubai Bank to Buy Turkey’s Denizbank for $3.2 Billion
Dubai’s biggest lender the National Bank of Dubai has agreed...
IHS Markit to  Buy Rival Ipreo  for $1.8 Billion
Data firm IHS Markit Ltd. said it will buy smaller rival Ipreo...
SBI Reports Record $1.1b Loss
State Bank of India reported a loss of Rs. 7,718 crore ($1.1...
EU, Mercosur Discuss Trade Deal
The European Union and South America’s Mercosur bloc could...

Add new comment

Read our comment policy before posting your viewpoints

Trending

Googleplus