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Brazilian stocks and currency added to their three-week rally on Monday, as new polls showed Jair Bolsonaro, the far-right presidential candidate and market leader, would win the win in the second half. Sunday ride.
The real rose 1.1% to R $ 3.6705 per dollar, allowing it to close at its highest level in almost five months.
The Bovespa stock index jumped to 1.77% to reach 85,711.83 before slightly reducing the advance to 1.5%.
Despite its inflammatory attacks on women, minorities and the gay community, Brazilians are coming together to support Bolsonaro's attempt to lead the largest economy in Latin America. Having failed to win the majority required for the victory in the first round elections held two weeks ago, new polls released Monday grant 57% of the vote to the former army captain, against 43% his rival, Fernando Haddad of the Left Workers Party.
Investors have also become aware of the idea of a Bolsonaro presidency, largely because it supports liberal economic policies, such as reducing the size of Brazil's overstretched state by cutting ministries. Bolsonaro's economic adviser, University of Chicago investor Paulo Guedes, also promised a massive privatization program for Brazilian state-owned enterprises to reduce the public debt. The two countries also pledged to undertake fiscal reforms, including a redesign of the country's pension program, to reduce the budget deficit.
Taking into account Monday's gains, the real rose 8.3% this month, while Bovespa gained 7.8%, making it the best-performing currency and the stock index for October, respectively. .
But analysts have questioned Bolsonaro's ability to carry through the much-needed but socially unpopular reforms and warned that investors currently accumulating Brazilian assets could prepare for a painful fall.
"Investor optimism about the potential for market-friendly reforms envisioned by the next president, Jair Bolsonaro, seems to be going too far," analysts at Capital Economics said. "A fragmented congress makes a major tax reform unlikely. Asset prices are likely to decline as political realities become apparent. "
