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business newsBrazil Markets: JPMorgan Acquires Brazilian Hedge Fund
The bank wants to increase its exposure where the action is.
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Moving on, the top story in Brazil this week was that JPMorgan (JPM) purchased Brazilian hedge fund Gavea. The purchase was done by JPM’s Highbridge asset management unit paying about $6 billion for a 55% stake. Gavea is a 7-year old hedge fund that was co-founded by Armino Fraga who headed Brazil’s central bank between 1999 and 2002.
The reason JPM is making this purchase is simple: the bank wants to increase its exposure to emerging markets to make up for sluggish growth from developed economies. Over the past two months UBS (UBS) announced a move to Brazil, along with Blackstone, Goldman Sachs (GS), and Nomura.
In earnings news Banco Bradesco (BBD), Brazil’s second largest bank by market value said its third quarter profit rose by 40%. According to the release, adjusted net income increased to 2.52 billion reais up from 1.8 billion reais last year. The 2.53 billion reais fell short of 2.55 billion reais that analysts expected. Driving the report was the bank’s loan portfolio which expanded by 19% to 255.6 billion reais and total assets increased by 26% to 611.9 billion reais.
The world’s largest iron ore miner, Vale (VALE), said it may opt against hedging as much as $30 billion of costs other than the US dollar next year. Vale correctly hedged this year that the reais would rise but it has yet to decide on a strategy for 2011 .According the CFO Guilherme Cavalcanti the currency war is causing uncertainties in the market.
Brazil’s State owned Oil Company, Petroleo Brasileiro (PBR) said it had opened a new exploration frontier off the north coast of Brazil. The discovery of oil is at a depth of 2,341 meters below the water and has larger volumes of oil then Guaricema and Dourado fields.
The rising price of commodities is forcing Brazil, Paraguay and Argentina to negotiate an alliance to sell grains and seeds jointly with large buyers in Asia. According to USDA data, a deal between the three countries would combine almost half of the world’s soybean production. Brazil’s Agriculture minister Wagner Rossi said, “We can start a new future where we can be associates. That way we will not be manipulated by buyers.”Further Reading:
Brazil leaves interest rates unchanged.
Analysts fear that Brazil’s government is getting serious about its “currency war” and not weighing the consequences.
Why Brazil’s capital controls may not be that bad.
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