As investors flee Brazil following Luiz Inácio Lula da Silva’s surprise re-election, Rajiv Jain, co-founder of GQG Partners, is preparing to buy into the panic. The firm, already the largest private shareholder in Petrobras, believes Brazilian companies remain attractively valued with strong earnings and high dividend yields. Jain, who manages about $150 billion, stated, “If you take a long-term view, we believe Brazil is one of the best equity markets” across emerging markets and could be a buyer if the selloff becomes more severe.
Brazilian markets cratered Monday after Lula’s unexpected victory, with the real suffering its steepest drop in more than two decades and the Ibovespa tumbling as much as 17%, triggering its first circuit breaker since 2020. The rout exposed heavy bets on Flávio Bolsonaro, whose surprise first-round lead fueled hopes for tighter fiscal policy. Jain is hoping the turmoil echoes an opportunity he spotted in 2022 when GQG boosted its Petrobras investment, a contrarian bet that paid off with over 285% returns.
He cited Lula’s first stint in the early 2000s, when Brazilian equities rallied amid a global commodities boom, as evidence that political fears don’t necessarily translate into poor returns. “Selling Brazil right now would be a mistake,” he said. Local markets were stabilizing Tuesday, with the benchmark equity index down about 0.7% and the currency climbing 1.1%. Brazil remains Jain’s biggest overweight bet in emerging markets, even after trimming holdings to fund purchases of semiconductor stocks in Taiwan and South Korea.
At the end of September, Brazilian stocks accounted for 14% of his $18 billion GQG Partners Emerging Markets Equity Fund, down from 24% in March but still nearly 10 percentage points above the benchmark weighting. Jain emphasized that curbing Brazil’s budget deficit remains crucial to reviving the economy, but said there remains scope for market-friendly reforms under Lula. He noted that investors tend to exaggerate the implications of political swings on companies like Petrobras, which is “still cheaply priced” and offers a high dividend yield.
He also favors Brazilian banks and utilities, concluding, “Politics in Brazil is never as good as people feel and never as bad as people think.”.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing