May. 20 at 2:21 AM
Morgan Stanley remains bullish on Brazil, seeing the market at an inflection point driven by expectations of a 2026 political shift, lower interest rates, and a potential return of domestic and foreign equity inflows.
The bank argues Brazilian equities could re-rate as fiscal discipline improves and monetary easing supports a rotation from consumption-led growth toward investment- and export-driven activity. Financials, materials, energy, and utilities are preferred, while consumption and healthcare are underweighted.
Key beneficiaries include rate-sensitive and capital markets names such as BTG Pactual, XP, and B3, along with utilities like Axia Energia. Nubank is also highlighted in a reform scenario.
The base case assumes up to 450 bps of Selic cuts through 2027, potentially unlocking significant domestic inflows after years of underinvestment in local equity funds.
Morgan Stanley outlines two scenarios: a reform path favoring financials, Petrobras, Banco do Brasil.
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