New building blocks for the B in BRIC

Rogerio Poppe, fund manger of BNY Mellon's Dubin-domiciled Brazil Equity Fund, believes optimism about Brazil's investment potential is well founded and outlines opportunities at sector level.

Poppe is optimistic about prospects for long-term earnings growth for Brazilian companies. "At the sector level, we believe banks may currently offer potentially attractive investment opportunities. Our main source of optimism lies in the belief that banks' earnings will not be as adversely affected by regulatory changes as recent share price declines might suggest,” explains Poppe.

Infrastructure related sectors are also favoured by Poppe. "Looking at the market, we believe some potentially attractive opportunities may be found in infrastructure-related sectors. We expect the government to pursue an aggressive policy of infrastructure building, with the 2014 FIFA World Cup and the 2016 Olympic Games in Rio de Janeiro being important drivers in this respect," he explains. "In addition, volumes of initial public offerings are expected to be high over the coming months, creating a number of opportunities to gain exposure to newly listed companies."

Poppe is adamant that hosting these events will have a beneficial economic impact on Brazil, coming principally from investments in general urban infrastructure. "These investments will boost economic activity almost immediately, and have the potential to lead to improvements in overall production levels in the longer term. The initial investment is estimated at around US$11 billion, but we believe the number could grow substantially - to around US$25 billion - as we approach the event," he says.   http://www.bnymellon.com