Brazil's high powered economy

Key Points:
External headwinds most culpable in 2011 for poor equity returns, 2012 (thus far) has seen returns of 18.8%
Positive policy support should see the Brazilian economy stage a strong comeback in 2012
Growing consumer strength poised to benefit 2 key sectors - Consumer Sectors, Financials Sector
Demographic and Structural changes present investors with opportunities to benefit from Brazil's continuing transformation
Brazil currently offers potential upside of 27%, maintain 4.5 Star "Very Attractive" rating
After a horrid year in 2011 where it lost -24.7% as a combination of rate hikes to combat inflation and a weak global economic outlook took hold, the Brazilian stock market has come roaring back in 2012 with returns of 18.4%.

EXTERNAL HEADWINDS MOST CULPABLE IN 2011
Ever since the re-ignition of the European debt crisis in the middle of 2011, Brazil’s economy has faced significant headwinds.
The uncertainty took its toll on the local economy with economic activity deteriorating as both capacity utilisation and industrial production began to fall, leaving 3Q 2011 GDP coming in slightly negative at - 0.1% on a quarter-on-quarter basis.
Internally, Brazil had been fighting its nemesis that is inflation in 1H 2011, hiking its key Selic interest rate to 12.50% as it sought to cool an overheating economy which also suffered from rising commodity prices. In addition, lending curbs were introduced in an effort to reduce credit available and reduce Brazil’s demand-pull inflation.
As for the Bovespa, the materials, industrials and utilities sectors were amongst the hardest hit as a result of the above while the Financials benefitted from the initial rate hikes before succumbing to pressure emanating from troubled Europe as well as rate cuts in 2H 2011.

With the closure of 2011, 2012 has spelt much better news for the Latin American nation.

Currently, the Brazilian government has undertaken several measures ranging from the slashing of its key Selic rate to cutting taxes on various goods in an attempt to boost growth since 2H 2011. With the government prioritising growth over inflation control, we take a closer look at 2 key sectors which are poised to deliver.

CONSUMER SECTOR - FROM STRENGTH TO STRENGTH
Brazil’s domestic consumption story, based on demographic and positive structural changes is something that’s not new to investors. However, what investors might not know is that the story has continued gaining in strength. Retail sales in Brazil have been climbing higher and higher, growing by close to 7% for the second consecutive month on a year-on-year basis in November and December, on the back of rising real wages and historically low unemployment (thanks to job creation), with retail sales growing by 7% for the second consecutive month on a year-on-year basis as seen in Charts 1 and 2 below.

CHART 1: RISING RETAIL SALES & REAL INCOME















CHART 2: MORE JOBS, LESS UNEMPLOYMENT


The strengthening of incomes and the creation of more jobs has also seen family expenditure become more resilient as compared to the past.
During the financial crisis of 2008-2009, although family expenditure did not contract, this key component of Brazil’s’ economy saw its growth rate fall significantly from 7.7% to 2.7% on a year-on-year basis from September 2008 to December 2008 in spite of the seasonal effect normally seen in December (holiday sales).
In the most recent episode of the European debt crisis, family consumption held up significantly better and demonstrated its new-found resiliency with a less painful fall from a 5.6% growth rate in June 2011 to a 2.8% rate in September 2011 (Chart 3).

CHART 3: CONSUMPTION'S INCREASING RESILIENCE


Taking a closer look at the retail space, the decision by the government to cut taxes for household goods has seen the purchases of furniture and appliances continue to hold its pace of growth steady with data showing a healthy year-on-year gain of 15.3% in December 2011. Supermarket retail sales have like-wise kept up its pace of growth, registering a growth rate of 4.6% in the same period. However, retail sales for apparel & footwear have slowed as a result of a minor slip in consumer confidence as the weak external environment saw consumers reduce their discretionary spending.

Given the increased stature of the Brazilian consumer, both the Consumer Discretionary and Consumer Staples are expected to benefit from the resilience of Brazil’s consumption story and its growing strength.

FINANCIAL SECTOR - LONG TERM BENEFICIARY
The financial sector in Brazil has long been on the up and up. Credit loan growth in the country has been growing steadily over the course of the decade as a conflux of factors allowed such phenomenal growth.

The very same demographic and structural changes in Brazil that has seen the consumer sector do well have also positively impacted the Financials sector.
With increasing affluence, credit cards and loans to service mortgages (which in part is also due to urbanisation, a structural change), the Brazilian financials have a benefitted from the consumer boom.
Consumer credit has almost doubled over the past since December 2007, while default rates still remain in an acceptable range of 7-7.5%, a far cry from the 8.5% seen during the peak of the financial crisis in 1H 2009 (Chart 4).

CHART 4: CONSUMER CREDIT BOOM


Looking at the larger picture of total private sector loans outstanding, currently, the total amount of these loans only reach approximately USD 1.2 trillion, with a booming economy in the backdrop and as the Middle Class in Brazil grows, incomes increase and urbanisation takes place rapidly, the financials are a sector which is poised for further rapid expansion.

The decision by the Brazilian central bank to cut interest rates is a double-edged sword for financials as although it will cut the rate with which they lend at, the rate at which they borrow to fund their operations will be reduced as well. Historically, the average banking spread for Brazil has averaged 27% with the latest figure as of end December 2011 registering a reading of 26.9%, almost spot on with the long-term average (Chart 5).

CHART 5: AVERAGE BANKING SPREAD


While margins are important for banks, we believe that an increase in the growth of demand for credit in Brazil as a result of lower borrowing rates will more than sufficiently make up for any shortfall in profits as a result of a potential narrower lending spread.

CONCLUSION

Any country moving from an “Emerging Market” status to “Developed Market” status provides investors with several opportunities to capitalise on demographic and other structural changes; in Brazil’s case, the ever-growing consumer spending power and the need for financial services will see the Consumer Staples, Discretionary and the Financial Services sectors prosper.

At current levels, the Bovespa is trading at a price-to-earnings ratio of 9.0X based on 2013’s earnings, representing a potential upside of 27% (as of 7 March 2012) by then when compared to its fair value of 11.5X. We have a 4.5 Star “Very Attractive” rating on Brazil, and a 5 Star rating on the larger Global Emerging Markets.

Bovespa bargain hunting.

Brazil's Bovespa Index has tumbled substantially and is currently holding below the bearish pivot resistance of 63,318 level.
It's now a very good hunting ground at great bargains.Moving in now at a staggered manner will provide great opportunities when the higher interest rates regime ends.
Brazil’s central bank began raising the benchmark interest rate from a record low 8.75 percent in April last year. The 300 basis points, or 3 percentage points, since then marks the biggest jump since 2005, when policy makers completed a series that added 375 basis points to the overnight lending rate.
Last Friday's index closing at 61,513.24 down 694,09 is still not safe as yet unless the index can sustain above 61,687 level.

Tracking the Dow on Friday,8/07/11(5 market days to index futures expiry)

Economic events:-employment situation,wholesale trade,consumer credit.

9:30am:--nearly 100.0 points opening gap down.

10:30am:--1st hour low,hammering the bottom.

11:30am:--New morning low,bullish engulfing.

12:30noon:--Morning star at the bear pivot.

1:30pm:--Failed to touch session resistance line.

2:30pm:--Pullback near to bear pivot support.

3:30pm:--Ascending soldiers.

4:00pm:-Bullish breakout.

Despite last Friday sell-off which came after the Labor Department reported that the US economy created a paltry 18,000 jobs in June, pushing the unemployment rate up to 9.2 percent,the overall weekly performance shows of a powerful bull in the driver's seat.It's an inverted bullish hammer.

Any intermittent pullback the Dow index will hit the MAV support before it continues its rally.

Brazil,world largest emerging equity market.

The Big Emerging Market (BEM) economies are Brazil, China, Egypt, India, Indonesia, Mexico, Philippines, Poland, Russia, South Africa, South Korea and Turkey.
Newly industrialized countries are emerging markets whose economies have not yet reached first world status but have, in a macroeconomic sense, outpaced their developing counterparts.
Emerging markets are nations with social or business activity in the process of rapid growth and industrialization.
So Brazil got its exclusive status due to heavy lifting comes from state-run oil giant Petroleo Brasileiro, or Petrobras according to a report released by Citigroup.
"The recent rise in Petrobras ... has been key to the surge in Brazil's overall weight," said Citigroup analysts Geoffrey Dennis and Jason Press in the report.
Bovespa's recent gains have been enough to outperform the MSCI Global Emerging Market index and bring Brazil's weighting to 14.95% of the index. That surpasses China's weight of 14.15% and Korea's contribution of 13.69%.
Rounding out the top 10 emerging markets by weight are Taiwan, Russia, India, South Africa, Mexico, Malaysia, and Israel.
Brazil is also now the 10th largest market in the world, as measured by the MSCI All Country World index, with a free float market capitalization of $509.1 billion.
The U.S. market is the largest, coming in with a free float market cap of $12.57 trillion.
Brazil's position as the top emerging market isn't guaranteed to last since market caps ebb and flow, which is why one analyst said investors should included factors such as economic fundamentals and regulatory issues as part of an evaluation of potential investments.
But one thing has to bear in mind for investors is that particular country corporate management, issue of a lack of personal freedom for individuals and government stability can bring a lot of influence to the status.
In fact Brazil could be a new economic power after China due their vast natural and human resources. In less than a decade the country already has thousands of multi-millionaires.
Brazil is best known for its production of agricultural commodities — first coffee ... then sugar ... then soybeans ... and, most recently, ethanol.
But Brazil is also among the leading exporters of aircraft ... mineral ores ... metals and steel.
Brazil makes more automobiles than the U.K., Italy, Mexico or India ... and it is the world's largest maker of cars with flex engines (that can run on either gasoline or ethanol).
China's world's largest cellular-services provider,China Mobile Ltd helped secure their ranking status.
Tracking the Dow:24/06/11.(4 market days to ending of Quantitative Easing)
Economic events:Durable goods order,GDP,Corporate Profits.
Asian Index Futures Expiry:4 market day to go.Next week rollover contracts volatility.

09:30am:--Bearish 20.0 points gap down.
10:30am:--Session low,technical rebound.
11:30am:--Hoovering near the resistance line. resistance.Shooting stars.
12:30noon:--Another shooting stars at the MAV resistance.
1:30pm:--A second shooting stars at the resistance line.
2:30pm:--Bearish pivot support line to be tested.
3:30pm:--Bearish breakout.Hammering to find the day's low.
4:00pm:--A small dragonfly doji with techical rebound insight.
***From the chart,you'll noticed that the previous day's last hour of trading has a clear reflection of what will happened the following day's market.The market makers have set up a bull trap on Thursday.The markets around the world are manipulated,trust yourself with your own trading inventions.Do not take any chances with those strong arm tactics.Follow the path of the light.

A week of Eurozone financial instability and Moody's warning created the spark to depress the market.
The Dow is pricing in the Fed's ending of Quantitative Easing program.The bears are having a hayday right till the end of this June month.
Friday's bears have covered the lower shadow of previous day but still incomplete.
Look forward to a new 3rd quarter,a new beginning and move in fast.

Banco Bradesco Sa American Depo(NYSE: BBD )

Banco Bradesco S.A, was formerly known as Banco Brasileiro de Descontos S.A., was founded in 1943 and is headquartered in Osasco, Brazil.It operated a network of 3,454 brancehs,30,657 ATMs,and 4,112 special banking service stations and outlets in Brazil.It also has subsidiaries in New York,London,the Cayman Islands,the Bahamas,Japan,Hong Kong,Argentina and Luxemborg. Listed at the New York stock exchange under the financial sector and is a foreign bank.

Chart shows the intraday movement on Friday.

How shall we tackle the intraday movement?

As for newcomers or novice,always wait for the first one hour trading to see the candlestick formation.

Never jump into the bandwagon based on impulse or having an overconfident euphoria.

This is our emotional weakness.Also our home computers can't beat those hedge fund companies who can execute orders at lightning speed. 9:30am-10:30am:-- The stock open with a bullish gap up and followed by a spinning top near the upper shadow.This implies that the candles light is going to be blown off.It then spike down near to the session bear pivot subsequently rebounded near the high to form a double top. Type of candlestick:-Inverted bull.

2nd Hour(10:30am-11:30am:):-- The stock is now hoovering within the bear pivot and MAV resistance,too many doji stars and bearish spin.In this hour you must plot a new session candlestick. Type formed:a graveyard doji.Should you move in yet?the answer is No.If you do have overnight position,bailout now afterall there is still time to manouvere.

3rd Hour:--(11:30am-12:30noon) Wait 5 times and see the index crawl.It opens low and bullish candle forming.Buy now.

4th Hour:(12:30noon-1:30pm) It has rebounded to session bull pivot and was hanging up there for too long.You'll noticed that there are intermittent bearish hammer.So get the hell out of it and make the profit.Do not worry about brokerage,the bottom line is you need to make yourself happy with the slightest profit.

5th hour(1:30pm-2:30pm) Opens at session high and down it goes to the MAV support line. Candle Type:Bearish Marubozu. 6th hour(2:30pm-3:30pm) candle type:A hangman.

Final hours(3:30pm-4:00pm) A bullish inverted hammer. Overall candlestick today:Bearish inverted with a long upper shadow looking to be filled again.

You'll noticed that the March candlestick formation of this stock is similar to that of Dow Jones who are now the dictator of the world's market. Every of the markets in the other parts of the world are also having a similar pattern.

So it is important to monitor the Dow's performance as well in order to get the direction.

Banco Brasileiro is now heading towards the bull resistance line.So for investment purpose can move in any time now.In the case of day traders,it'll be day to day basis.

Dow on Friday is 3 months to QE expiry,15 market days to index futures expiry. Economic Events:Motor vehicles sales,ISM Mfg Index,Construction situation The start of 2nd Quarter.

9:30am:-Bullish 40 points gap up.The US unemployment rate fell for the fourth straight month in March.

10:30am:--Opening gap being completely filled,ascending bulls lift stocks to session high.Bearish engulfing pair follows.

11:30am:--Hammer and hangman dominating at a double top. The Commerce Department reported U.S. factory orders fell in February for the first time in four months.

12:30noon:--Sign of bearish descend. 1:30pm:--There are still sign of hangman harassing the market meantime holding at the bull pivot support line. 2:30pm:--Bearish engulfing,pullback to near day's low.

3:30pm:--After completing the double bottom,bulls managed to bring it back to the MAV resistance line. 4:00pm:--Closing the day at the MAV support and resistance line.

March end month closing saw the Dow forming a bullish dragonfly doji. The bullish strength is still intact and any sign of correction wil be lingering towards March bull pivot support line. Despite the sharp rise in oil price and threats to global economic growth,investors brushed off all these concern. Stocks have made a rapid rebound from a steep, mid-March selloff triggered by Japan’s devastating earthquake and tsunami, the subsequent threat of a meltdown at damaged reactors and the outbreak of a civil war in Libya. Some strategists have said the selloff was overdone, and attention has returned to U.S. deal activity and economic data.

Venezuela an oil rich Latin America country.

Venezuelan President Hugo Chavez signed a 16-billion-dollar deal with China to drill for oil in the resource-rich Orinoco basin.

China National Petroleum Corp (CNPC), the country's largest oil and gas producer would form a joint venture with state-owned Petroleos de Venezuela (PDVSA) to produce 450,000 barrels a day of extra heavy crude.

Venezuela sent an average of 385,000 tons of fuel oil each month to China in the first half of 2009.

Venezuela, a founding member of the oil cartel OPEC and Latin America's top oil exporter had also signed a similar accord with a Russian consortium. The deal will see the group of five Russian companies invest more than 20 billion dollars over three years, and gives them rights to drill for oil in the Junin-6 block of the Orinoco oil belt. That joint venture is also expected to produce 450,000 barrels a day by 2012, Chavez said. Oil-rich Venezuela claims current proven reserves of some 142.3 billion barrels, but Venezuelan experts believe the Orinoco basin could hold an additional 235 billion barrels.

Venezuela's capital city,Caracas has its very own Stock Exchange known as BOLSA DE VALORES DE CARACAS.
Petroleos de Venezuela SA is ranked 27 in the 2009 Fortune Global 500 list.
The Petroanzoategui field and upgrader in the Orinoco belt was controlled by ConocoPhillips until being nationalised in 2007 and is now owned by Venezuela's PDVSA.

Petroleos de Venezuela (PDVSA) has issued more than $6 billion-worth of US dollar-denominated bonds so far this year, ostensibly to fund growth and help pay some of the money it owes service providers, but, say critics, the bond sales are used to help the Venezuelan government bring in much-needed hard currency.

The Dow at October index Futures/options Expiry Day.

9:30am:--Bearish 30.0 points start followed by gap being fully filled.

10:30am:--Shooting star at near session high.The usual time for pullback.

11:30am:--Finding a low with dragonfly doji.

12:30noon:--Usual time must find retracement but managed at bear pivot with inverted bull.

1:30pm:--Decision time for the day,a dragonfly doji noticed.

2:30pm:--MAV resistance breakout...a hammer for pullback.

3:30pm:--Ascending bulls with final peak and shooting star.

4:00pm:--Bulls held it near the bull pivot looking forward to a new index month.

A Double support at the bull pivot point augurs well for the ensuing bulls.This is an anticipated pullback in time for the October Index Futures expiry and a migration to a new November month.
Investors grew uneasy about a rising dollar and spiking demand for the safest government debt.
They have become more sensitive to signs of weakness as they sought to justify lofty share valuations.