SAO PAULO, Oct. 3 (Portal) – Stronger-than-expected support for President Jair Bolsonaro in the first round of Brazil’s presidential election was hailed by financial markets on Monday as the race led to an Oct. 30 runoff.
The Brazilian real is up about 3% against the dollar, while the Brazilian Bovespa Index (.BVSP) is up 3%.
Bolsonaro’s left-wing challenger, former President Luiz Inácio Lula da Silva, missed out on victory in Sunday’s first round of voting. Lula was 5 percentage points ahead of Bolsonaro but narrower than most opinion polls suggested.
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Bolsonaro’s allies also put in a strong performance on the congressional vote, potentially limiting Lula’s scope for dramatic policy changes if he does return to the presidency.
Some market participants expected the outcome could persuade Lula to commit to more dovish economic policies while boosting Bolsonaro’s campaign, which has promised reforms and privatizations welcomed by many investors.
“I think people will see reform as more likely,” said Ricardo Lacerda, founder and CEO of investment bank BR Advisory Partners (BRBI11.SA), adding that he thought Bolsonaro could take the lead.
The odds of Bolsonaro’s potential re-election drove up shares in state-controlled companies on the expectation that they could be privatized should he secure a second term. Shares in Banco do Brasil SA (BBAS3.SA) rose 7.8% and preferred shares in oil company Petroleo Brasileiro SA, known as Petrobras (PETR4.SA), rose 7.8%.
Results in southeastern states such as Sao Paulo and Minas Gerais also impacted some stocks exposed to those regions.
Former minister Tarcisio Freitas, seen as a pro-market politician, is leading the race for governorship in Sao Paulo. Shares in plumbing company Companhia de Saneamento Basico do Estado de Sao Paulo, known as Sabesp (SBSP3.SA), rose 13%. The markets expect Freitas to privatize the company.
Meanwhile, shares of energy company Cemig (CMIG4.SA) rose 5% after the re-election of market-friendly Minas Gerais state governor Romeu Zema.
Gustavo Cruz, strategist at RB Investimentos, said the hard-fought race showed that neither candidate was given a mandate for radical policies. “Whoever wins will not get a blank check from voters,” he said.
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Reporting by Tatiana Bautzer, Andre Romani and Camila Moreira. Edited by Brad Haynes, Chizu Nomiyama and Rosalba O’Brien
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