New Year – 2010 Stock Market Performance

There was a long break for stock markets between the end of the 2009 business year, and
the beginning of 2010. For the Ibovespa and the Dow Jones the end of the year was
Wednesday December 30th, and for the remainder of markets it was a day later. Markets
reopened on the Monday, January 4th, with a significant burst of enthusiasm. The
Ibovespa jumped 2.1%, while the usually undemonstrative CAC 40 leapt 2%. The DJI,
the S&P and the FTSE all increased 1.5% to 1.6% above December`s final index. The
HSI took an additional day to grow 1.9%. The O Estado de Sao Paulo suggested that
investors were expecting the Ibovespa to reach 74.000 by week end. Reality was to be a
little less exhilarating.

Figure 1 shows the relative performance of the six stock markets under discussion, with
all starting at 100% with their closing index of December. The Ibovespa did better than
other markets reaching a 3.1% increase in 2010 on January 6th. Since then, the index has
tended gently downward, finishing last week with a net growth of 0.6% for 2010.

Figure 1

Stock Markets Performance, Jan 4 to Jan 15th

104.0%
103.0%
102.0%
101.0%
100.0%
99.0%
98.0%
1/ 09
10

1/ 1 0
10

1/ 1 0
10

1/ 1 0
10

1/ 1 0

1/ 01 0

1/ 0 10

12 0
1/ 0 10

14 0

0
1/ 0 10
01

01

01
20

20

20

20

20

20

20

20

20

/2

/2

/2

/2

/2

/2
1/

1/

2/

3/

4/

5/

6/

7/

8/

9/

10

13

15
11
/3

1/

1/

1/

1/

1/

1/
12

DJI FTSE CAC 40 HSI Ibovespa S&P

Source: Yahoo Finance

The two markets that have managed to preserve most of their gains are those of the USA,
the DJI (+ 1.7%) and the S&P (+ 1.9%). Information concerning industrial production,
consistent with an economy in growth was issued, and these two markets benefited. The
Hang Seng, however, lost all of its gains and on January 15th was 1% lower than its
December close.

Taking a slightly longer view from the date that Brazil imposed its 2% tax on foreign
investment in the stock market i.e. October 21st, and later a 1.5% tax on foreign investors
buying ADR shares outside Brazil, the pattern of Brazil performing better than most
markets continues. The period in question is just less than three months.

Using October 21st as 100% for all of the indices (pls see Figure 2), we find on January
15th the Dow Jones with a 5.7% growth, and the Ibovespa with 5.6%. The S&P and the
FTSE are at 4% growth, and the CAC 40 has 2.1%. Over this period, and due primarily to
the hike in Yuan interest rates, the Hang Seng shows a lackluster negative growth of
-3.3%.

Figure 2
Stock Markets Performances, Oct 20th 2009 - Jan 15,
110.0% 2010
108.0%
106.0%
104.0%
102.0%
100.0%
98.0%
96.0%
94.0%
92.0%
90.0%
10

10

11

11

11

11

12

12

12

12

12

1/

1/
5/

12
/2

/2

/3

/1

/1

/2

/1

/8

/1

/2

/2

20
0/

/2

0/

/2

2/

9/

/2
7/

7/

4/

/2

5/
20

20

00

20

20

20

00

00

20

20

20

10

01
DJI FTSE CAC HSI IBOV S&P
09

09

09

09

0
09

09

09

09
Source: Yahoo Finance

Prospects for Ibovespa long term growth appear good, with some of the potential
difficulties being ameliorated, at least in the long term. First, the US$ has stabilized,
remaining within the 1.70 to 1.80 band now for the last four months, and showing less
and less volatility. The second issue is that commodity prices have also started to
rebound, meaning better prices for exporters. So far, however, no significant signs of
relief for exporters of manufactured goods.

Tomorrow we will review Bovespa activity figures for the first half of January.