The Importance of the ratting in the stock market’s performance

The stock market in Brazil in this first semester of the year, would be one of the less profitable possible investment in the country into yesterday. But today, Standard and Poors classified Brazil with the investment rate and changed completely this situation. Link:valor

Bovespa would present into April 29^th a loss of 0.1% in the 4 firsts months of 2008. Although, after S&P announcement, Bovespa presented the best result of all kinds of investments so far, giving as return 6,23%.(against 3,55% of the national bonds and 3,5% of fixed founds).

These results just shows how important are the ratings for investors and stocks. A simple change in the rating can change the result of the market in few seconds, even if the market continue in the same way, valorising even more the process and source of information.

Brazilian's new problem

In the last years Brazil has been facing many problems with its neighbor’s countries, Brazil´s ex-commercial partners. Most of the Brazilian problems are related with energy and the old deals with governments that are not in the power anymore. After the problems with Bolivia´s gas and Venezuela´s oil, the new Brazilian´s problem is with Paraguay and its electric energy.
For the new Paraguay´s elected president, Fernando Lugo, the country´s growing is his main objective. So, in order to attract new investors, Fernando Lugo is planning offer energy incentives because he says that Paraguay has right to receive half of all energy produced in Itaipu´s hydroelectric dam.
Although he said it, Paraguay´s has one agreement with Brazil that all the energy that is not going to be used in Paraguay must go to Brazil without any other cost, so the country doesn´t have half of all the energy produced in Itipu´s hydroelectric dam. In Fernando´s Lugo point of view, that treatment is not fair and if he can´t change that situation, at least he can give energy´s incentives that will helps in Paraguay´s growing. That´s just one more diplomatic problem for Lula´s government.http://www.ft.com/cms/s/0/e9a79d62-10c0-11dd-b8d6-0000779fd2ac.html

Different Points of view

It is very interest how one case can be noticed in many different ways. The Societe Generale crisis is a great example. In Europe, most of the papers were surprised and tried to understand what really happened in the Bank. The news papers brought articles and reporters telling about how the fraud occurred, who were evolved on it and what is going to be the consequences for the Europe as a hole.
In South America, the news paper just brought a short brief about the case even in important financials news papers like “ O Valor”. Most of the media and its readers were worried about what was going to be affected with the bank crisis and not in how come this happened. In many papers you could see news about the relation between the bank and the stock’s prices, but it was difficult to find deep information about the situation in Societe Generale.
Maybe the most interest case was in U.S.. Although they brought many news about the crisis and how did it happen, the American’s news paper were really interest in compare the European crisis with the problems that american’s economy were facing in that time.
This just prove that if you really want to know a fact, you should look in many sources as possible, because each source has one specific interest and different point of view.

The problems that the financial market have been facing in the last months made the group Lehman Brothers close three of the main investment founds. The official reason for the end of these founds were that in crises times it becomes much more difficult to get credits in the financial market.
But many specialist in financial market are saying that the main reason for the end of these founds is the ratings given by the ratting agencies. In last months, many Lehman Brothers founds were downtrend by the agencies what made their founds looses high amounts of value.http://www.valor.com.br/valoronline/Geral/financas/Internacional/Lehman+Brothers+liquida+tres+fundos+de+investimento,,,22,4873646.html?highlight=&newsid=4873646&areaid=22&editionid=1984
This kind of news just proves the importance of the ratting agencies in the financial markets. Even if the market knows that this ratings are just a way to estipulate the real risk of one asset, their effect are one of the most important thing when the investor is choosing where he should put its money.

Brazilian's Blue Chips Founds

Vale do Rio do Doce and Petrobras are now-a-days the most important shares in the Brazilian stock market. The importance of these shares and the recently grow in prices make both shares very attractive for many investors all around the world.

Looking for these investments, many banks are creating a new category of found in Brazilian markets: Blue chips Founds. In the Safra’s Blue Chips Founds, for example, the capital invested is protected, that means:

If at the end of the year one share go up and the other go down, the investor receives 90% o f the profitability in one and all the principal invested in the other share.

If one of the shares go up more than 45% in this period, the investor just receives 18% of the profit of this stock and 90 % of the profit of the other.If both of than go up more than 45%, the investor receives 18% of the total profits.

If both of then go down in this period, the investor receives the capital invested in both shares.

This kind of founds are just possible because both of the stocks are very well evaluated by the market and presents great possibilities of appreciation in the long term, so investors prefer to create a found with risk almost zero just to have more capital to invest in those shares. Link

Bolivia's Gas

When a huge reserve of gas was discovered in Bolivia, all the south american’s country had their economies changed in any way.
For Bolivia, that new source of gas looked like a possible way to change its position as the poorest country in the South America. But as long as Bolivia was that poor, the country wasn’t able to explore and sell the gas by it self. So they needed foreign investments what made the gas’s profits shared between Bolivia and their investors.
But two years ago, Evo Morales became the new Bolivia’s president and he wanted to change this situation. In Morales point of view, all the gas profits need to stay in Bolivia and the only way that this could happen was with the nationalization of the Gas industry. With that decision , many foreign investors faced a lot of troubles with their forecasting and lost huge amounts of money.(One nice example is the Brazilian company Petrobras).http://www.ft.com/cms/s/0/5712c2a6-ebae-11dc-9493-0000779fd2ac.html?nclick_check=1
Maybe Petrobras was the most affected company with Evo’s decision. Although they have discovered a vast reserve of gas in Brazil last year, their forecasting was completely changed because they will need at least five years to start explore that gas and in that time they were planning to keep importing the Bolivia’s gas. But now they have to make a new forecast for the next years and they are facing problems to communicate the market about the newplans as we can see in this new in Petrobras website. http://www2.petrobras.com.br/portal/frame_ri.asp?pagina=/ri/ing/index.asp&lang=en&area=ri
This shows us how difficult is to communicate the market and investors about the company’s decisions and most of the cases companies will try to do it the best way, even if for it happen they have to hide some importants information .

The influence of the American crisis in emerging countries:

For a long period of time, the emerging countries were very dependent of the central economies. In that time, a crisis in the United States economy would represent for sure at least a discomfort for those countries.

A recession in a big country, like U.S.A. or Japan for example, used to affect directly the production of emerging countries. For many years, emerging countries just produced outputs that they could sell and exports for other places, because their economies weren’t strong enough to keep its health just with the internal market.

Although the central countries still have important influence in the emerging economies, the recent U.S. subprimes crisis showed the world that emerging economies now-a- days can keep growing alone. For many specialists, the reasons for this are two facts.link FT

1) Emerging Markets are more structured today than years ago. So today, the financial fundamentals and their own infrastructure are improved in a way that countries can grow by their selves, not stimulated just for others anymore.

2) They have new trade’s partners. The amazing growth presented by the two most populated countries in the world, China and India, guarantee to the emerging counties some demand even in times of crisis in U.S. or Europe.