Bloomberg — Latin America’s top economy could see fewer but bigger equity offerings this year as surging local interest rates and presidential election anxiety heighten the appeal of large and liquid transactions.
Brazilian share sales raised a total of 155 billion reais ($27 billion) in 85 deals in 2021, only 2.5% below the record 159 billion reais raised in 2020, data compiled by Bloomberg show. The number of deals will drop, but overall proceeds could still be large, according to Gustavo Miranda, head of investment banking at Banco Santander SA’s Brazilian unit.
“The market will be quite selective, favoring larger deals and well-known companies,” Miranda told Bloomberg News. “Liquidity is key for investors to get in and out of positions when needed, especially in a more volatile year.”
Less than a quarter of the 46 Brazilian listings on the local stock exchange last year raised over 1.5 billion reais ($264 million), Bloomberg data show. For secondary offerings, the percentage was higher at about 50%.
For 2022, one of the most-anticipated deals is the sale of a stake in petrochemical firm Braskem held by its controlling holders -- Novonor SA and state-owned oil producer Petroleo Brasileiro SA -- valued at $1.5 billion. Meatpacker BRF is also planning a share sale, while the Brazilian government could launch an equity offering to privatize utility giant Eletrobras. These three deals could account for up to 40 billion reais, Miranda said.
Brazilian issuers will face challenges including the central bank’s cycle of rate hikes, which is boosting the appeal of fixed-income products for locals while reducing the appetite for stocks. What’s more, Brazil has presidential elections scheduled for October, with leftist President Luiz Inacio Lula da Silva leading opinion polls and persistent uncertainty over the country’s fiscal trajectory.
The country’s benchmark Ibovespa stock index has lagged global peers in the past 12 months, with a 19% drop. The broad market weakness weighed on companies that went public last year, leading to lackluster returns for new listings.
Santander, which has about 50 people in its investment-banking team in Brazil, is seeking to expand especially on the tech and environmental, social and governance fronts, according to Miranda. It plans on hiring outside the Sao Paulo and Rio de Janeiro states, focusing on peripheral areas of the continent-sized nation, he said.