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SÃO PAULO – The market is optimistic about pension reform and hopes that the text to be approved by the Congress will be broader than that of the current proposal. With this, it is expected that the government of Jair Bolsonaro can adopt a reform generating more economy compared to the proposal of the government of his predecessor, Michel Temer. This is revealed by the XP Investimentos survey conducted among 87 institutional investors between January 28th and 31st.
Most respondents (53%) expect parliamentarians to approve a more comprehensive reform than the previous Temer government proposal, while 25% expect it to at least equal and 22% to a minor reform.
Expectations are even greater when it comes to sending the text by the government to Congress: 79% of respondents expect a broader proposal than that of Temer, while 15% think that it will be wider and only 6% only that it will be the same thing.
Respondents are also concerned about the reform of their investments. 48% expressed concern about the approval of the pension plan if they had Brazilian badets over the next twelve months. 20% said they were worried, 28% a little worried and only 5% said nothing.
The probability that the reform will be approved in 2019 has been increased from 70% in December to 75% now.
And this concern will be reflected in the market based on what will happen after retirement – or not approved. In case of failure, investors estimate that Ibovespa would drop 23% to 75,000 points, while the dollar would rise 15% from the R $ 3.65 level, reaching 4.20%. R $ at the end of 2019.
On the other hand, if a reform of the magnitude of Temer was approved, the index would increase from 13% at the end of 2019 to 110,000 and the dollar would increase by 2% to 3 R $, 60.
Already in the most positive scenario for the market, with the approval of a reform generating double the economy of the previous proposal, the stock market could rise 29% to 125,000 euros and the US currency would fall by 10%, to R $ 3.30
See below the market outlook for scenarios without and with reform of pensions.
As for the chronology, 78% think that the project will be sent in the first quarter of 2019, which represents an increase of optimism compared to 63% in the year. December survey. For 72%, the first vote in the House will take place in the second quarter and 68% expect the vote to take place until the third quarter.
The market becomes more and more optimistic about the collection with privatizations. It is expected that they will earn 300 billion rand in four years.
This whole scenario, with a positive outlook for reforms and privatizations, leads to good investor approval by the current government: 86% think it's good / good, 13% consider it as regular and only 1% think it is bad / bad.
The figures are similar when the question is how the rest of the government will be: 86% deem it good / good (compared to 83% of the previous survey), while 10 % see the ordinary government, down 14% from the latest survey. Those who believe the government will be bad / bad have gone from 4% to 3%.
The evaluation of Congress has seen a sharp improvement in the midst of legislative change. In December, 63% thought the Congress was bad / bad, a figure that dropped to 18%. However, only 23% think this legislature will be optimal / good, compared to 13% in the previous survey. The majority, 59%, consider the Congress as a regular member, compared to 24% of the polls the previous month.
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