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

To: Steve Fancy who wrote (6765)	8/17/1998 4:43:00 PM
From: MGV	Respond to of 22640

The article you posted has some very nice content for TBR long positions. I like the following points, in particular. 1. Brazil has huge reserves if ever money leaves the country," said Paul Masco, head emerging markets debt trader at Salomon Smith Barney Inc. External reserves are estimated at about $72 billion, according to Banco Santander. 2. "Brazil has a strong, functioning economy, much better-developed capital markets." 3. Part of the reason of the slide in Brazil's bonds has been technical , according to traders. Many investors with long positions in Russian debt have taken short positions in Brazil's "C" bonds and global bonds as a sort of rough hedge. Brazil's Finance Minister Pedro Malan alluded to technical pressures on the country's external debt in comments made Monday. "Those who need liquidity will sell off their Brazilian debt because ours are the most liquid securities." To be sure, compared to its neighbors, Brazil's domestic debt, at around 33 percent of Gross Domestic Product (GDP), is high. Moreover, the current six-month rate on short-term debt is roughly around 21 percent, according to analysts. Brazil's fiscal deficit, at around 6.5 percent of GDP, compares to about 1-1/2 percent for Mexico and 2 percent for Argentina, Latin America's other major economies, said Luis Luis, director of emerging markets bond research at Scudder Kemper Investments. More importantly, external debt is a whopping 286 percent of annual exports, he said. That could be a source of pressure on the currency. 4. "Brazil's currency may be slightly overvalued, but it has no banking crisis which is what triggered the crisis in Russia," said Luis. Moreover, Brazil's banks are very highly capitalized and its domestic debt is held primarily by local investors, he said.