Investors eye Brazilian equities after election selloff

Brazilian stocks continued to sell off Wednesday, but some analysts have suggested that the “overdone” reaction now makes Brazilian equities more attractive. Brazil’s main stock index sold off further on Wednesday amid mounting fears over the country’s fiscal picture following the surprise election defeat of Flávio Bolsonaro, who then fled to the US. This week’s selloff was “much more ​about the positions the market had adopted in recent days” than “ a reaction to fundamentals,” Brazil’s finance minister said, pointing to investors unwinding pre-runoff bets on Bolsonaro; some analysts suggested the “ overdone ” reaction makes Brazilian equities more attractive. The election upset showed the shortcomings of prediction markets, which “helped fuel a political narrative that briefly created around $130 billion in stock market wealth, which subsequently vanished,” a Bloomberg columnist argued. “If it happens again around the US elections, the havoc would reach a whole new level.”