01/11/2024 – 21:52
Santander sees room for a stronger rally on the Brazilian Stock Exchange this year, predicting that the Ibovespa will reach the 160,000 point range. With the influx of foreigners, the bank's institutional equity strategist, Aline de Souza Cardoso, assesses that there is a lack of capital participation from domestic investors for the index to reach the target price.
“For there to be a more significant increase in the Stock Exchange and the consolidation of this leg of the index, there must be a return in local flow and in the allocation of institutional investors”, he said, in a press conference this Thursday.
According to B3, foreign investors invested R$17.373 billion on the Stock Exchange in December. In 2023, external capital was positive at R$44.765 billion. Meanwhile, institutional investors withdrew R$12.45 billion in December, resulting in a negative result of R$64.87 billion last year.
“We see an increase potential of around 25% for the Ibovespa by the end of 2024. At our target price, the index would trade at 9 times the price-to-earnings ratio (P/L)”, considers the strategist.
In addition to the inflow of local capital, Cardoso highlights that the vision is positive when considering a continuous cycle of interest flexibility by the Central Bank (BC), with the Selic rate reaching 9.5% by the end of 2024, as well as the increasing probability of a soft landing (soft landing) in the United States economy, which should lead the Federal Reserve (Fed, the American Central Bank) to cut interest rates in the second half of this year.
“Around here, there is still a risk of fiscal deterioration if some revenue gains prove to be temporary, if there is a more expansionist stance on the spending side or if there is a broader loss of credibility in the fiscal anchoring process,” said the strategist.
On the American scene, according to her, the risk of stronger inflationary pressures that could result in even more rigorous monetary tightening or even possible financial stress could worsen the global economic slowdown.
Worse is over
To corroborate the optimistic view of Ibovespa's performance, the Santander analyst says that the worst in terms of Earnings Per Share (EPS) growth is over. “After falling around 20% in 2023, we expect to see earnings recover by 15% in 2024, with most of the recovery led by domestic names,” Cardoso said.
According to Santander calculations, the education sector should record 178% growth in net profit in 2024, accompanied by transport (+91%) and retail (+89%).
However, the analyst believes that there are idiosyncratic issues within each sector, such as the regulatory scenario for banks, including the possibility of a cap on revolving card interest and the end of the JCP tax benefit; the repercussions of changes to tax incentives for retailers and the increase in cross-border competitors; and, updating the regulatory framework for the energy and basic sanitation sector.
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