thread: It's STILL not over, girls, I am afraid to say - but I do think we are getting close. Barring a rout in China/Hong-Kong, then Brazil WILL hold. To be honest, there IS an evident risk now of an attack against the real, but the bet is they will hold. Taking that as an assumption, then I would say we are looking at a further 10% downside before a significant rally starts. "Significant" meaning back towards $90. It is going to be a long long time before this puppy is trading back at 125 (post sell-off levels).
Key here lies not in the equity markets, but in the debt. Until there is any meaningful recovery in debt prices (and thus a drop in implied yields/interest rates) there simply cannot be any sustainable recovery in the region's equity markets.
Why would anyone buy a mexican equity when they can buy a 1 year Treasury bill paying 30%? why would they buy a Brazilian one, and risk a possible currency devaluation, when they can buy a 1 year Treasury bill yielding almost 20% which is DOLLAR PROTECTED??? answer: they won't !
But, as I started off by saying, I do think we are near bounce-point. I can easily envisage a situation where we gap-down tomorrow at the open, and then whip around and actually close higher. Anyway - here's hoping....... ! |
