For the time being, the Brazilian Securities Commission (CVM) is not considering banning short-selling or stopping trading in Brazil. Short-selling is a kind of operation that allows investors to profit when stocks fall—which has happened consistently of late. The high volatility caused by the coronavirus crisis led France, Italy, and Spain to ban short-selling until further notice.
Markets have been clobbered over the past couple of months, with the Ibovespa benchmark stock index falling 48 percent since January 2. Over the past eight trading sessions, the São Paulo stock market has triggered six circuit breakers. On Tuesday, the Philippines became the first country to suspend its local stock exchange.
In a statement to The Brazilian Report, CVM said it is providing guidance to market players, but added that “so far, there are no discussions about [shutting down the stock market or banning short-selling].”
Ibovespa opened the day down 7 percent, despite the Central Bank dropping interest rates to a new record low, at 3.75 percent a year. As several banks and analysts slash GDP projections for Latin America and Brazil, investors worry that the economic slowdown will soon impact companies’ earnings.