Bovespa In November

Bovespa in November – Part I The Brazilian stock market has moved with stability and confidence in recent weeks to reach levels that were last seen in mid-October, after government measures were taken i.e. a 2% tax, to discourage foreign investors. The tax has had a number of effects: •

First, the participation of foreign investors in the Bazilian stock market for the full month of November has not become available (Thus, we expect to post Part 2 of this analysis later this week), but we do know that the participation of foreigners has been curtailed from a consistent 36% to 40% of market share, to a 26% to 28% of market share. The pace of increase in value of the stock market has declined. For instance, on the euphoria of the news of the 2016 Olympic Games the growth was 9.3% in less than 20 days, reaching a closing index of 67,239 on the 19th of October. The tax was imposed immediately after, and the index took until November 17th to reach a similar level. After a neutral October, Bovespa grew 9.2%.

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We continue to track the Bovespa as compared with five other stock markets, the Dow Jones Industrial Average (“DJI”), and the Standard and Poors 500 (“S&P 500”) of the USA, the Financial Times and London Stock Exchange 100 Index (“FTSE 100”) of the United Kingdom, The Cotation Assistée en Continu 40 (“CAC 40”) of France, and China`s Hang Seng Index (“HSI”). We have been reviewing these numbers since the incidence of Brazil`s IOF tax on October 21st 2009 (Initial Value). The point of the comparison is to see whether IBovespa has suffered due to the incidence of the tax compared with the performance of other indices. As may be seen from Figure 1, and as of November 30th, the CAC 40 is at 95% of its Initial Value. The Hang Seng, having passed through some recent difficulties is at 97.5%, with the FTSE at 99%. The S&P has maintained its Initial Value at 100.4%, and the two best performers are Ibovespa at 102.9% and the DJI at 103%. Given the IOF tax and the complementary tax on ADRs, these results show a significant vote of confidence by investors in Brazil and its stock market. Figure 1 Stock Markets Performance October 20th - November 30th

106.0% 104.0% 102.0% 100.0% 98.0% 96.0% 94.0% 92.0% 90.0%

4/ /2

7/ /1

DJI

09

09

09

FTSE

20

20

20

CAC 40

11

11

0/ /1

09

09

HSI

9

20

20

S&P

00

0/ /2

7/ /2

/2 /3

11

11

10

10

Ibov Source: Yahoo Finance

Figure 2 below shows the day by day performance of Ibovespa throughout November, with the final value growth figure being 9.2%. Figure 2 Ibovespa November Performance

12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

09 20 0/ /3 09 11 20 8/ /2 11 09 20 6/ /2 11 09 20 4/ /2 09 11 20 2/ /2 11 09 20 0/ /2 11 09 20 8/ /1 09 11 20 6/ /1 11 09 20 4/ /1 11 09 20 2/ /1 09 11 20 0/ /1 11 9 00 /2 /8 11 9 00 /2 /6 11 9 00 /2 /4 11 09 20

/ /2 11

Source: Yahoo Finance

We show below the monthly growth rates for the Ibovespa since October 2008. While one might not expect the type of growth rates (12% - 13% in February – April, 2009) that we saw when the stock market was climbing out of its, happily, over-exaggerated slump. Also, given the neutrality of the preceding month (0.0% growth in October), 9.2% is still an outstanding performance. We may only wonder what the index might have been if the government had not imposed the taxes! Figure 3

Ibovespa - Monthly Performance October '08 to November '09

15.0% 10.0% 5.0% 0.0%

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ly ju ne ju ay m ril ap ch ar m ry ua br fe y ar '08 r nu ja be 8 m ce r '0 de be m ve 8 '0

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-10.0% Source: Yahoo Finance

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-5.0%