Today, after taking a beating on Monday, Petrobras due for more turbulence. Increased coronavirus cases lead states to more restrictive measures. Increased productivity is the goal as Brazilian companies plan to invest in 2021.
The Petrobras debacle set to run and run
We expected turmoil, but Monday’s trading session was carnage for Brazilian assets. In the first business day since President Jair Bolsonaro announced he will change the command of Petrobras, shares of the state-controlled oil giant dropped an eye-watering 20 percent — the second-worst single-day rout since Petrobras went public in 1997. Since Friday, the company has lost BRL 100 billion (USD 18.3 billion) in market value.
- Other companies also performed badly. Fears that the government will no longer observe governance principles in state-controlled firms led energy producer Eletrobras and retail bank Banco do Brasil to lose a combined BRL 113.2 billion in market value.
- Questions over the government’s economic policy fuel mistrust with Brazilian assets in general, including private ones. In New York, 51 of the 58 Brazilian companies trading American Depositary Receipts (ADRs) suffered losses.
Why it matters. The loss in value may give Petrobras’ minority shareholders grounds to sue the company for failing to respect its...