Bolsonaro’s strong showing in Brazil mood could boost markets, bankers say

SAO PAULO, Oct. 3 (Reuters) – Stronger-than-expected support for Brazilian President Jair Bolsonaro in the first round of the presidential election could boost Brazilian financial markets on Monday, bankers and analysts said as the race to an Oct. 30 drain .

Bolsonaro’s left-wing challenger, former President Luiz Inacio Lula da Silva, failed to win the first round of voting on Sunday. Lula’s 5 percentage point advantage was tighter than most polls had shown.

The difficult outcome for Lula could force him into more moderate economic policies, observers say, while fueling Bolsonaro’s campaign, which has promised reforms and privatizations that excite many investors.

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“I think people will see reforms as more likely and stocks will have a strong rally on Monday,” said Ricardo Lacerda, founder and CEO of investment bank BR Advisory Partners (BRBI11.SA), adding that he thought Bolsonaro could lead the way. to take.

Sergio Vale, chief economist at MB Associados, said he expected financial markets to welcome the prospect of a second round of voting, which will “bring Lula more to the center and require more negotiation in the coming weeks.”

He added that the strong crackdown on Bolsonaro’s allies in Congress could also limit Lula’s room for dramatic policy changes if he returns to the presidency.

JPMorgan analysts led by Emy Shayo Cherman had indicated in a letter to clients last week that a tight race between Lula and Bolsonaro would boost markets.

“It opens up two possibilities: Lula moves more downtown, he may even have to specify who his finance minister will be, and Bolsonaro’s chances of winning are higher than the average of the indicated polls.”

Gustavo Cruz, strategist at RB Investimentos, highlighted key stocks that could react to expectations about the vote.

The prospect of an outright first-round win for Lula has boosted shares of for-profit educational companies and homebuilders, based on bets that Lula would provide incentives for their sectors, as his Workers’ Party has done in the past.

On the other hand, greater opportunities for Bolsonaro could boost shares of state-controlled companies such as Banco do Brasil SA (BBAS3.SA) and Petroleo Brasileiros SA (Petrobras) (PETR4.SA). Both are candidates for possible privatization after Bolsonaro transferred control of the formerly state-run electric utility Centrais Eletricas Brasileiras SA (Eletrobras) (ELET6.SA) to investors.

Regardless, Cruz said the hard-fought race showed neither candidate will be given a mandate for radical policy.

“Whoever the winner is, he will not get a blank check from the voters,” he said.

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Reporting by Tatiana Bautzer, Andrew Romani and Camila Moreira. Editing by Gerry Doyle Editing by Brad Haynes

Our Standards: The Thomson Reuters Trust Principles.

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