The Stock Market Falls

The Brazilian stock market in 2010 is demonstrating weakness even with the Brazilian
economy booming (The economy was estimated to be growing at a 9.8% annual rate in
the first quarter of 2010). So far, in 2010, and as represented in Figure 1 the market is
down by 15.2%.

Figure 1

Ibovespa in 2010
74000
72000
70000
68000
Ibovespa

66000
64000
62000
60000
58000
56000
1/
1/ 01 0
1/ 20 1
1/ 20 1

2/ 20 1
2/ 01 0

2/ 01 0
2/ 20 1
3/ 20 1
3/ 01 0
3/ 01 0

3/ 20 1
3/ 20 1

4/ 20 1
4/ 01 0
4/ 20 1
4/ 20 1

5/ 20 1
5/ 01 0
5/ 20 1
4/

15

5/
11
18 0
25 0

1/
8/

22 0
1/
8/
15

22 0
29 0

12
19 0
26 0

3/
10
17 0
2

2 0
2

2 0
2

2 0

2 0
/
/

/
/

/
/
/

/
/

/
/2
01
0
Source: Yahoo Finance

This negative performance is the result of a number of factors, of which the difficult
situation in Europe is the most important. The concerns over the ability of Greece to
continue as a viable member of the Euro Zone provides an opportunity for a debate
concerning the effects of a single currency for the European Community, on individual
economies, even if the circumstances of crisis and recriminations is not the easiest in
which to draw firm conclusions. However, other issues such as World liquidity, and the
flight of foreign investors from Brazil in the last six months have added to the pain.
Taking the Long View

Figure 2 shows the relative performance of six diverse stock markets using the closing
index of June 30th 2008 as 100 for all indices. The indices chosen were the Dow Jones
Industrial Average (“DJI”), and the Standard and Poors 500 (“S&P 500”) of the USA, the
Financial Times and London Stock Exchange 100 Index (“FTSE 100”) of the United
Kingdom, The Cotation Assistee en Continu 40 (“CAC 40”) of France, China`s Hang
Seng Index (“HSI”), and Brazil`s Indice da Bolsa de Valores de Sao Paulo (“Ibovespa”).

The Ibovespa, the FTSE and the HSI are the only indices to have reached their June 30th,
2008 levels, which the Ibovespa surpassed for a prolonged period between October 2009
through early May, 2010. However, as of close of business on May 20th the Ibovespa was
10.5% lower than in June, 2008. The two best performing indices within this time period
are the DJI, currently at 92%, and the FTSE which is 90% of June 30th levels. The S&P is
at 84%, the HIS at 88%, and the CAC 40 is at 77% of June 2008 levels.
 Figure 2

Stock Market Performance, J une 30, 2008 to May 20, 2010

1.2
1.1
1
0.9
0.8
0.7
0.6
0.5
0.4
6/
7/30/
7/14/20
8/28 2008
8/11//2008
9/25 2008
9/8/2/2008
1022 0008
10/6//208
11/2 2008
11/30/208
12/1/2000
12/17/ /2088
12/1 2000
1/ /295/2088
1/12/ /200
2/26 20008
2/9/2/20098
3/23 0009
3/9/2/209
4/23/0009
4/6/2209
5/20/0009
5/4/2209
6/18 0009
6/1/2/209
6/15/0009
7/29 209
7/13/2009
8/27/2009
8/10//2009
9/24 2009
9/7/2/2009
1021/0009
10/5 209
11/19/2009
11/2 /209
11/1/62000
12/30/2099
12/1 /200
1/ /24/2009
1/118/ /2009
2/25 20009
2/8/2/20109
3/22/0110
3/8/2200
4/22 0110
4/5/2/200
5/19/0110
5/3/2200
17 0 10
/210
01
0
DJ I FTSE CAC 40 HSI Ibovespa S&P
Source: Yahoo Finance

Shorter Term Views

A view based upon the same stock market indices, but covering the only the last seven
weeks shows how the respective markets are faring in a crisis situation. From this
perspective we can see that Ibovespa has lost 17.3% of its April 1st value, and is the most
adversely affected of the markets. The CAC 40 is the second worst affected with a loss of
value of 13.6%, no doubt due to the substantial holdings, of French banks of Greek
bonds. The FTSE has lost 10.7% in the same period. The S&P, down 8.4%, the HIS,
down 8.0% and the DJI, down 3.8% are doing better.

Figure 3
Stock Market in Crisis
April 1 - May 20

110.0%
105.0%
100.0%
95.0%
90.0%
85.0%
80.0%
3/

4/

4/

4/

4/

5/

5/

5/
31

7/

14

21

28

5/

12

19
20

20
/2

/2

/2

/2

/2

/2
01

10

01

01

01

10

01

01

DJI FTSE CAC 40 HSI Ibovespa S&P

0

Source: Yahoo Finance

May 21st: On news that German lawmakers had passed a law giving effect to their part of
the Greek bail-out package, the European bourses closed between 0.2% and 0.5% down,
and the US markets are trading 1.0% up. The Ibovespa, however, is up 2.2% and may
pass 60,000 points this afternoon.