Investors still optimistic about pension reform, but warn of volatility

Ibovespa’s collapse in March made investors realize the road to pension reform bill will not be an easy one, but that did not wreck their faith that it may lead to a positive outcome, judging by Brazil’s recommended portfolios for April.

Brazil’s benchmark stock index lost 0.18 percent during the month—right after reaching its 100,000-point historical peak—due to a political crisis that spread jitters across the market. Fears that the fight between House Speaker Rodrigo Maia and President Jair Bolsonaro could get in the way of the reform made the stock market index crash by more than 3 percent in a single day, while the U.S. Dollar reached BRL 4.00 for the first time in 2019.

Shortly after, Economy Minister Paulo Guedes stepped in, and both Mr. Maia and Mr. Bolsonaro put their squabble on ice. In a note to clients, analysts Mirae Asset highlighted how important this intervention was, with Mr. Guedes “adopting a posture of pacification and rapprochement between the Executive and Legislative [branches] that should ensure progress of the pension bill. If this happens in a fast and non-traumatic way, we may have signs of evolution for the local stock market.”

The firm has maintained its recommend stocks portfolio for April, including B3, Banco do Brasil, CCR, Cosan, Iochpe-Maxion,...