SAO PAULO/MEXICO CITY (Reuters) – Brazil’s benchmark Bovespa index will not quite make up for 2013’s losses next year, a Reuters poll showed on Thursday, while energy reforms will help Mexican shares post modest gains.
Brazilian stocks were among the world’s worst performers this year, the Bovespa having lost 18 percent so far compared with a 25 percent gain in the S&P; 500 index and a 10 percent rise in London’s FTSE 100 .
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Deteriorating government finances, weak economic growth and persistent inflation pressure have kept many investors at arm’s length from Brazilian shares.
The Bovespa was also dragged lower by expectations the U.S. Federal Reserve would begin to taper its monetary stimulus program, which had supported global demand for riskier assets.
Analysts in the poll, conducted over the past week, predicted the index would rise to 55,000 by mid-2014, a 10 percent rise from Wednesday’s close, and hit 59,000 by year-end. Still, that would fall short of the its 2012 closing level of 60,952.
Nearly every analyst suggested a Fed decision on tapering was the major overhang threatening the Bovespa in 2014.
While the majority of economists see that happening in March, some are warming up to the idea that it could happen as early as this month or at the January policy meeting, a Reuters poll showed on Wednesday.
“You’re best off picking companies that are dollar-oriented since the dollar is likely to strengthen (after tapering),” said Andre Paes, an analyst with Infinity Asset Management, who suggested exporters like iron-ore producer Vale SA , steelmaker Usiminas , and pulp maker Fibria Celulose SA .
Analysts also highlighted a number of domestic risks that could keep local shares in check.
“We will spend the whole year concerned about economic growth, inflation, a possible ratings downgrade, elections – there are a thousand things that could happen to negatively affect the market here,” said Ariovaldo Santos, a broker with H.Commcor in Sao Paulo.
Santos’ comments echoed those of other analysts who suggested a tight presidential race in 2014 could lead to costly populist measures from the administration of President Dilma Rousseff, who is expected to run for a second term.
Analysts did, however, expect the index to be substantially less volatile thanks to changes in its composition due to take effect at the start of 2014.
Mexico’s IPC index, which has fallen 3 percent this year, should rise to 46,600, the poll showed, a 10 percent rise from Thursday’s closing levels.
Mexican stocks slumped off a record high early in 2012 and a sharp economic slowdown weighed on stocks through the year. But signs of stronger growth and the initial effects of major economic reforms could help support equities next year.
“We don’t expect an extraordinary year, but better (than 2013),” said Jorge Gordillo, an analyst with CI Banco in Mexico City, who highlighted the positive impact of energy reforms in Mexico which are widely expected to help drive economic growth.
“All the things that kept the market and investor enthusiasm stuck we believe will flip in the coming year,” he said.
(Additional reporting by Priscila Jordao in Sao Paulo; Additional polling by Hari Kishan in Bangalore; Editing by James Dalgleish)