Bank of America downgrades recommendation for shares in Brazil

Bank of America strategists cut Brazil's rating in its Latin America equity portfolio to "marketweight" from "overweight", citing a more challenging outlook for interest rates and weaker expectations for corporate earnings.

"The smaller space for interest cuts eliminates an important domestic support factor", they stated in a report to clients dated Tuesday (9), citing that the bank's economic team now forecasts the Selic rate at 14.25% by the end of 2026, from 13.25% previously, which implies only an additional cut in June, followed by an extended pause. Selic is currently at 14.5%.

"Inflation risks remain tilted to the upside, amid weakness in the real, while election-related volatility is increasing," they added, adding that they continue to see specific opportunities.

In the region's portfolio, they stated that they had increased exposure to Chile and Colombia, maintained "overweight" for Argentina and "marketweight" for Mexico, as well as some exposure to Peru.

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Source: CNN