Shares of companies with low market capitalization in Brazil are plunging as the local stock market is hit by the prospect of weaker economic growth and investors redirect their bets towards fixed income products.
Or index Small Cap hit the lowest level since June 2020 on Wednesday, while the MSCI Brazil Small Cap has underperformed the MSCI Brazil by more than six percentage points since the beginning of the year.
While some houses including management company Legacy Capital project a contraction in Brazil’s Gross Domestic Product in 2022, equity funds are having to divest themselves when dealing with redemptions amid rising interest rates.
FIAs registered a net redemption of R$6.1 billion in November, according to Anbima, the association of participants in the country’s capital markets.
Expectations of discouraged inflation and economic slowdown are bad signs for small caps, said Rodrigo Crespi, an analyst at Investments Guide.
“We see a migration to value companies — or even to fixed income, mainly by the retail investor.”
The main falls of the Small Cap in the year to date are from the road implements company The recruit, with a loss of 33%, followed by the platform for investors TC Traders Club and yes Locaweb (LWSA3).
Source From: Moneytimes
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