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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: Steve Fancy who wrote (371)	11/11/1997 3:26:00 PM
From: Steve Fancy	Read Replies (1) \| Respond to of 22640

Brazil state cos top picks post package - analysts Reuters, Tuesday, November 11, 1997 at 14:51 --------------------------------------------------------------------- I'm trying to find links to post on these news releases. I can't post to many more. I don't want to get kicked off of SI. --------------------------------------------------------------------- By Ian Simpson NEW YORK, Nov 11 (Reuters) - State-owned Brazilian companies are among top picks for investors looking for stocks amid an $18 billion belt-tightening plan, analysts and fund managers said. Those blue-chip stocks are better poised to weather shocks from the package, including a likely recession, they said. The plan announced Monday is designed to bolster confidence in Brazil and its currency, the real, among international investors. Favorite picks include state telephone holding Telebras SA (SAO:TEL_.P) (NYSE:TBR), state oil company Petrobras SA (SAO:PET) and utility holding Eletrobras SA (SAO:ELE). Francois Gour, Latin American equity strategist at Caspian Securities, said companies in Brazil's vast state sector were a safe haven as the economy slowed and company earnings fell. He said economic growth would drop to two percent from an estimated four percent next year. State companies are less likely to be hurt in a recession than private companies in part because they can count on state backing. They also are to get higher tariffs under the plan. "It will be difficult for companies to post good earnings next year. Telebras and Petrobras are not that sensitive to price pressures," Gour said. "A slight recession tends to benefit Petrobras" since it would import less fuel, boosting its margins, he said. James Holmes, a portfolio manager at Heartland Advisors in Morristown, N.J., said the measures likely would slow down the economy, the biggest in Latin America. "But if you stay with non-economically sensitive companies ... it's a good time to be buying them," he said. Analysts also said state companies were attractive because the reformist government plans to privatize many of them. Telebras, for instance, is scheduled to be sold off by mid-1998. In announcing the package, the government said it would add new companies to its privatization plans and speed up the sale of public water companies. Sao Paulo state plans to sell 20 percent of its stake in water utlity Sabesp (SAO:SBS) by June 1998. The package features $18 billion in spending cuts and money-raising measures, income tax hikes for individuals, layoffs of 30,000 state employees and an end to some corporate tax exemptions. Brazil's markets have been pummeled since mid-year by fears that Brazil would have to devalue its currency, the real, as emerging economies in Southeast Asia had done. Stefano Natella and Jim Upton, investment strategists for Credit Suisse First Boston, called in a report for a "selective approach" to shares. They said public companies were "the place to be because of their higher liquidity and privatization prospects." Among private companies, they recommended "cash-rich companies selling consumer non-durables." Investors should shun such interest-sensitive stocks as banks, retail, construction, consumer durables and steel, and companies with a high level of short-term debt. Investment guru Mark Mobius, the head of the $14 billion Templeton Emerging Markets group, told Reuters Monday he also was sticking with big state-owned companies. Copyright 1997, Reuters News Service

To: Steve Fancy who wrote (371)	11/11/1997 4:55:00 PM
From: DMaA	Read Replies (2) \| Respond to of 22640

I thought I understood ADRs but wow I guess I don't. I did not know that those shares in the bank valt could be owned by someone else ( eg. the country of Brazil ) How can you have a capital gain if you don't own the underlying equity? If and when they take TBR public, do they call back those shares in the bank valt and sell them leaving the ADR holder with.....what? Or do holders of the ADR get shares in the company 1 to 1? If say half the shares in the company are stored in the bank valt, is this the same as saying the company is really half public? Exactly how many ways can you get screwed if you own an ADR?