Brazlian Stock Market Activity, December, 2009

The stock market grew by 2.05% in December1 with an Ibovespa which was the third
lowest level of growth in the last 15 months. However, activity was high, at R$ 132.7
billion. The monthly activity numbers from October 2008 to December 2009 are shown
in Figure 1. December, notwithstanding its relatively few trading days (December had
19 business days, as did November, but October had 21) was the month with the second
highest trading volume of the 15 months considered. Average trading per day was R$
7.3 billion in October, R$ 6.4 billion in November, and 7.0 billion in December.

Figure 1.
Bovespa - Monthly Volumes
October '08 - December '09
200.00
R$ billions

150.00

100.00

50.00

0.00
D

Ju

D
O

Ja 8

Fe

M 9

Ju 9

O 9

N
ec

ug

ep

ec
ov

pr

ov
ct

ct
ar

ay

l-0
n-

n-
b-
-0

-0

-0
-0

-0

-0

-0
-0
-0

-0
09

-0

09

9
0
8

9
9

9
9
8

9
Source: Bovespa

The Bovespa fluctuated within a 5% range in December (see Figure 2), which explains
to some extent the higher volumes of investment. However, the markets were roiled for
a few days in mid-December when stock markets in general were affected by news of
problems with lower than expected housing starts in the USA, and news of Greek
indebtedness. Brazil gave no reason for investor discomfort.

Figure 2.

Ibovespa in December, 2009

70000

69000

68000

67000

66000

65000
11

12 0 9

12 9

12 9

12 9

12 9

12 0 9

12 0 9

12 0 9

12 0 9

12 0 9

12 0 9

12 0 9

12 0 9

12 0 9

12 0 9
/3

/2

/4

/6

/8

/1

/1

/1

/1

/1

/2

/2

/2

/2

/2

/3
/0

0/

6/
0/

/0

/0

/0

2/

4/

6/

8/

0/

2/

4/

8/

0/
09

Source: Bovespa

1
Brazil News Blog uses the closing Ibovespa index of November and December as the bases for
calculation of the month’s growth.
The composition of buyers and sellers changed to some extent in December, with
November`s highest net buyers, (Figure 3 shows a graphical representation of monthly
net investment) Financial institutions becoming net sellers. Likewise, individuals
became net sellers, while foreigners were net buyers, although to a relatively marginal
degree (R$ 512.2 million). However, for the first time since October 2008, institutional
investors became the market’s buyers.

Figure 3.

Monthly Net Investment (Oct '08 - Dec '09)

$8,000,000

$6,000,000

$4,000,000
R$ 000's

$2,000,000

$0

-$2,000,000

-$4,000,000

-$6,000,000
9
9
08

9
9
09

9
08

9
8

09

09

09

9
-0

-0

-0
-0
-0

l-0

-0
-0

-0
-

b-
-

n-

p-
n-

ar

ay
ov

ov
ug
pr
ec

ec
ct

ct
Ju
Ja

Fe

Ju

Se
M
O

O
A

M
N

N
A
D

D
Foreigners Individuals Institutional Fin Insts

The chart below (Figure 4.) shows a correlation between the Ibovespa and the net
investment made by foreigners in December. It will be seen that the effect of foreign
investment was as close to neutral as it has been at any time during the period under
consideration. In the right hand column we include the Ibovespa monthly growth
figures.

Figure 4
Linear Correlation of Foreign Inv & Ibovespa
Monthly Growth
December 0.11 2.05%
November 0.46 10.40%
October 0.53 0.00%
September 0.32 5.80%
August 0.62 8.90%
July 0.88 3.10%
June 0.60 6.40%
May 0.83 -3.30%
April 0.65 12.50%
March 0.84 12.70%
February 0.80 12.90%
January 0.68 -2.80%
December '08 0.21 4.70%
November '08 0.84 2.60%
October '08 0.69 -6.80%
Entire Period 0.53 38.4%
Source: Bovespa
December was a positive month for the stock market in Brazil. Doubts that the
discouragement of foreign investors via a 2% tax (1.5% on ADR purchase) would
stagnate the markets has proved to be false, and the volumes and indeed the mix of
investors gives cause for optimism for a positive first quarter of 2010.