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Strategies & Market Trends : Telebras (TBH) & Brazil
TBH 1.100+15.5%Nov 11 3:59 PM EST
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To: Fred Levine who wrote (7038)8/22/1998 9:44:00 AM
From: RockyBalboa  Read Replies (5) of 22640
 
Stock prices abhor uncertainty - and stock prices seem to maintain momentum, which is additionally supported by trend-following trading schemes.What makes me think that the TBR drop is accompanied with increasing volume at the NYSE, and even after the strongest rebound the stock does not end up. Who gathers TBR stock?

To add some thoughts about the BRL. As far as I know the price for the TBR auction stake has been set in reais and a major part of it is due next year. Devaluing the reai and creating some import cost-pushed inflation in Brazil may also be a help in maintaining or increasing prices in the telecomms sector.

So the price tag for international investors may decrease with a faster ongoing or sudden devaluation. Maybe there are people who put some additional pressure on the reai, even through the media. I compare the talks about a sharper reai devaluation to "putting out fire" and see whether it really ignites.

On the other hand, a devaluation scenario is not too far away. Rising spreads in brady bond market makes it more difficult - or expensive - to lend from abroad. So it could make sense to devalue at once ( after the October election?) to ease the current budget deficit and the necessary future financing of it in $ terms. The question is at which extent a devaluation is sufficient to have some effect on public financials and recent trade deficits.

Christian
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