Bovespa IPO highlights Brazil’s economic strength

Shares in the Bovespa stock exchange are trading more than 35%¹ higher one week after its IPO raised $3.7bn. The flotation of the Sao Paulo-based exchange, Latin America’s largest, demonstrated investor appetite for exposure to Brazilian equity trading. Gartmore’s Emerging Markets Opportunities Fund, Gartmore’s SICAV Emerging Markets Fund and Gartmore’s SICAV Latin American Fund have exposure to Bovespa Holding, and are overweight in the stock relative to their respective benchmarks.²

Chris Palmer, Head of Global Emerging Markets at Gartmore Investment Management, comments, “We have seen rapidly rising volumes across emerging equity markets, and expect this will be translated into higher revenues for many of the exchanges. In the past, minority shareholders in Brazilian firms were bedevilled by poor corporate governance and multiple share classes. The Bovespa has introduced much more stringent listing requirements for companies coming to market and for existing entities who are trying to improve their governance standards. This ‘Novo Mercado’ shows how investors in emerging markets are prepared to reward the highest standards of regulation and oversight”.

Declining interest rates, robust demand for commodities and a growing consumer base have all enabled Brazil to become a driving economic force within Latin America. This has been reflected in the volume of transactions taking place on the exchange. Figures from Merrill Lynch suggest this has increased 15-fold in USD terms in the five years to July 2007. The Bovespa IPO was the 56th offering from Brazil this year, making the country the third largest emerging market issuer after China and South Korea.