Petroleo Brasileiro S.A. - Petrobras (PBR)

[eastunder]

Brazilian ADRs Set To Worsen: Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR), Oi SA (ADR) (NYSE:OIBR), Centrais Eletricas Brasileiras SA (ADR) (NYSE:EBR.B), Cemig (NYSE:CIG)

by Rebekah Denny / October 27, 2014

http://www.marketsemerging.com/brazilian-adrs-set-to-worsen-petroleo-brasileiro-petrobras-sa-adr-nysepbr-oi-sa-adr-nyseoibr-centrais-eletricas-brasileiras-sa-adr-nyseebr-b-cemig-nysecig/1715020/

Brazilian stocks trading in New York such as Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) climbed higher Friday after a Sensus poll fueled speculation that candidate Aecio Neves may gain support and beat President Dilma Rousseff in the election runoff.

Petrobras, Oi SA (ADR) (NYSE:OIBR), Centrais Eletricas Brasileiras SA (ADR) (NYSE:EBR.B), Companhia Energetica Minas Gerais (ADR) (NYSE:CIG) and Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL) each gained more than 5% on Friday.

But, all these stocks were declining sharply on Monday following the victory of President Dilma Rousseff over pro-business challenger Aecio Neves in Sunday’s presidential election.

The sell-off may be contained in the next few days, however, if Rousseff signals she will tweak economic policy to boost Brazil’s flagging economy, as hinted in a conciliatory first speech she gave after re-elected on Sunday.

After the closest, most divisive campaign since Brazil returned to democracy three decades ago, Rousseff won 51.6 percent of votes in a runoff against Neves, who won 48.4 percent support.

The tight and fast-changing election campaign had sent Brazil’s financial markets on a wild ride with big gains whenever Rousseff lost ground in polls and drops whenever her odds looked stronger.

Rousseff’s economic policies have been roundly criticized by investors for tipping Brazil into a recession while damaging state-run companies such as oil producer Petrobras and lender Banco do Brasil along the way.

Many investors placed their hopes on a Neves victory, seeing him as ready and able to rescue the private sector from what they see as the heavy and unpredictable hand of Rousseff’s leftist government.

“The central bank is likely going to increase intervention to avoid what they likely see as overshooting of the real, but regardless it should be a large move of maybe up to 3 percent or so,” wrote Citi analyst Dirk Willer.

Any staunching of the losses in future sessions will most likely come on bargain-hunting and signals of more market-friendly policies from the Rousseff administration, analysts said.