Institutional investor’s share in stock market shrinks
In a scenario of high real and nominal interest rates, with no prospect of a reversal in the short term, and still suffering from withdrawals from shareholders, the institutional investor — in this case, basically investment funds — has progressively shrunk its share in the Brazilian stock market. After reaching a peak, when accounting for a 35.2% share of business in 2019, the category saw its participation reduced to 23.7% on the 11th — the lowest percentage in 12 years, shows Valor Data survey.The movement is opposite to that of foreign investors. More optimistic with Brazil — and with emerging markets as a whole — due to the reopening of the Chinese economy and the weakening of the dollar with a possible end of the tightening cycle of the Federal Reserve, international players now report 55.8% participation in the stock market, the highest level since 1994 — in 2019, this share was 42.6%.The balance of contributions by non-residents in the secondary segment of B3 in the year already amounted to R$1.54 billion until the 11th, while the institutional investors accumulated withdrawals of R$965.9 million. Last year, the balance was R$100.8 billion positive for foreign investors and R$142.5 billion negative for the second group.Part of the institutional investors’ movement is explained by the performance of the domestic fund industry last year, when there were redemptions in all modalities — R$158.1 billion in multimarket and stock funds, and another R$48.9 billion in fixed income funds. In other words, asset managers had to act in the face of this scenario.Institutional investors temporarily returned to the stock market in the third quarter of 2022, precisely when the expectation for cuts in the Selic, Brazil’s benchmark interest rate, was more accurately priced by the market. But this was reversed after the first signs of the new administration, whether in the fiscal area, with the Transition PEC (the proposal to amend the Constitution), or in the assembly of the economic team, more political than the market wanted."I believe that the current positioning reflects what was already outlined in the election, with foreign investors preferring the new president and local investors wanting the incumbent’s reelection. The formation of the economic team and the first fiscal measures did not help either. Now, the Brazilian funds have developed this more cautious view, even if it is still too early to say that we will not have fiscal anchoring or...
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