For many investors from Eurasia, the Brazilian stock market seems to be an exotic and mysterious place, but no myths and legends are associated with it. In this article, we will dispel stereotypes, talk about the São Paulo stock exchange and look at a few examples of how to trade Brazilian stocks.
The history of the creation of the Brazilian Stock Exchange
August 23, 1890 – the date of the foundation of the São Paulo stock exchange, which became the first such organization in the country and which is now the largest in Latin America. Its official name today is “B3 SA – Brasil, Bolsa, Balcão” or simply “B3 SA”. In 2008, B3 SA merged with a commodity exchange and is currently considered universal, providing access to trade in almost all types of financial instruments.
The Brazilian exchange received its main development in 1965, when the Brazilian Ministry of Finance, retaining the right of a regulator (CVM Securities Commission), excluded it from the status of a state one.
In 1997, B3 SA carried out an upgrade and gave access to trading not only to business sharks, but also to investors with small capital due to the possibility of electronic trading using the Mega Bolsa system. After that, branches were opened in London, Rio de Janeiro and Shanghai. Further, the development of the exchange went in the direction of attracting investors, and everyone was offered to become co-owners by purchasing shares in free circulation.
Listing on the Brazilian Stock Exchange
In order to list its shares on B3 SA, a company must fulfill the following conditions:
1. At least 25% of the issued shares must be in free circulation. As an exception, it is permissible to reduce the number of quoted shares to 15%, subject to high daily liquidity.
2. The board of directors must include independent directors, at least two or at least 20% of the total.
3. The issuing company must obtain permission from the state regulator CVM.
A wide range of securities are traded on the Brazilian Stock Exchange, including:
4. Commodity and Currency Futures
8. Treasury bills (10-year futures contract on US Treasury bonds)
The most liquid shares of the B3 SA stock exchange
The “blue chips” of the Sao Paulo stock exchange include the shares of the following companies:
1. PETROBRAS is the largest oil company in Brazil.
2. Itau Unibanco Banco Holding SA is one of the largest Brazilian banks.
3. Banco Santander Brasil SA Unit is another well-known representative of the country’s banking sector.
4. Banco Bradesco SA is the 3rd largest bank in Brazil.
5. Ambev SA is the largest brewing company in the country.
6. Vale SA is a mining company.
7. Banco do Brasil – shares of Banco do Brasil bank, the oldest and largest in the country.
8. Itausa Investimentos Itau SA is a holding that includes Itau Unibanco, Duratex pulp and paper production, various chemical enterprises, etc.
9. Telefônica Brasil is a telecommunications company.
10. Klabin is a paper and packaging manufacturer.
11. B3 SA SA Brasil Bolsa Balcao – shares of the B3 SA exchange itself.
All of these promotions (except the last two) are now available on our R Trader web platform. See the full trading conditions at the end of the article.
How to trade Brazilian stocks
There are very few differences between the São Paulo exchange and, say, New York, and they are all in small details. Therefore, there are no special trading strategies or methods of analysis for Brazilian stocks – a trader can use his entire arsenal, honed in the American market, to invest in Brazilian companies.
However, there is some features that need to be kept in mind:
1. Currency of quotation of Brazilian shares – Brazilian real (BRL). As of July 2021, the exchange rate against the US dollar is approximately 0.19 BRL per 1 USD.
2. Trading time – 16:10 – 22:55 (UTC + 3).
Now let’s take a closer look at several shares from the B3 SA stock exchange and try to analyze the further movement of their prices.
Ambev SA (ABEV3: BVMF)
One of the largest breweries in Brazil, founded in 1999. It sells its products to 14 countries in the Americas.
Looking at the daily chart of its shares, the following picture can be observed:
After a rollback from the upper border of the ascending channel, the quotes continue to restore their positions. At this stage, the horizontal support level was tested, which, in turn, may be a signal for continued growth. Given that the price is still above the 200-day moving average, it can be assumed that the upward trend will continue. The target benchmark for growth is the nearest resistance, concurrently – the local maximum.
Comparing these factors, we can make a preliminary conclusion that after a slight rollback, after testing the resistance, the quotes will break out and continue the development of the upward trend.
The initial price target for growth is the 19.50 mark. In general, the shares of the brewing company look promising for buying on corrections.
JBS SA (JBSS3.BVMF)
The largest food processing company engaged in animal protein processing.
At this stage, the company’s shares are losing ground and continue to decline to the lower border of the ascending channel. Given that the quotes are still above the 200-day moving average, it can be assumed that a rebound will occur upon reaching it.
The target reference point for the rollback is the level of 27.50. After the support test and the rebound, there are all the prerequisites for the continued development of the upward trend. The target for further growth will be the nearest resistance level at 31.80.
At the same time, a decrease in the consumption of the company’s products may further undermine the economic indicators and contribute to the continuation of the fall in quotations below the 200-day moving average. In this case, the target could be the level of 26.50.
Itaúsa SA (ITSA4.BVMF)
The holding, through its subsidiaries, manages banking services, textile production and processing, energy transportation, etc.
On the current daily chart, quotes continue to decline within the ascending channel. On the way of the fall, the price is expected to have two support levels: the horizontal level around the 10.35 mark and the 200-day moving average, the breakdown of which will be a signal for the continuation of the decline. The target reference in this case will be the next support level – 9.90.
At the same time, taking into account the expanded scope of the management company, there is every chance of a recovery in positions and a rebound in quotes from supports. In the future, the price may renew the maximum values and test the 12.50 mark.
Stocks traded on the Brazilian stock market will undoubtedly find their admirers among traders and investors. In the future, in terms of profitability, they can become on a par with the mastodons of the market, but at a relatively low cost, they will attract, first of all, novice investors and speculators in the stock market.
To trade Brazilian stocks, you must have a brokerage account, have the necessary knowledge about the market, trading strategies and analysis, as well as know the nuances of the Brazilian exchange.
Trading conditions for Brazilian stocks at R Trader
- Number: thirty
- Platform: R Trader (Web, iOS, Android)
- Spread: from 0
- Leverage: up to 1: 5
- Commission: 0.1% per share (minimum 10 BRL)