Here’s How to Trade Brazil Assets Overseas on Election Night

(Bloomberg) – Investors looking to profit from Sunday’s Brazilian presidential election will turn to Asia to place their first trades.

Brazilian President Jair Bolsonaro fought his way to a runoff against Luiz Inacio Lula da Silva on October 30, with his left-wing challenger getting the larger share of the vote on Sunday but falling short of the overall victory some opinion polls had suggested he was on course for .

The Next Funds Ibovespa Linked ETF, a Japan-listed exchange-traded fund that tracks the Ibovespa benchmark stock index, could be the first option for traders starting at 8 p.m. in New York. Others include Asian stocks with Brazil exposure, such as South Korea’s Wireless Power, which derived about 8% of its sales from Latin America’s largest economy last year, and Tokyo-based agrochemicals maker Nihon Nohyaku Co.

Once Europe opens up, investors will have the opportunity to place bets on dollar-denominated government bonds. The most liquid government bond is 2031, followed by 2037 and 2041 bonds.

Some of the country’s largest companies, including state-owned oil producer Petroleo Brasileiro SA and mining giant Vale SA, have debt and depositary receipts listed in Europe.

Read more: A stock investor’s guide to the Brazilian presidential election

It’s also home to the parents of some Brazil-listed companies, such as French grocer Casino Guichard-Perrachon SA and energy supplier Engie, as well as Spanish telecoms operator Telefonica SA and lender Banco Santander SA – all of which may be active. Stellantis NV, the maker of Jeep SUVs and Peugeot cars, could be the focus as it derives about 9.2% of its sales from South America, with Brazil accounting for a large chunk.

Forex traders will not have many opportunities to bet directly on the real, although the Mexican peso will be open and considered a rough indicator of risk. Local currency and swaps markets start at 8 a.m. New York time, while equities start an hour later.

Here is a list of assets to keep an eye on before Brazil goes into business:

currency

Trading in the Brazilian real is limited to local hours, so the main currency is the Mexican peso, which is generally quite liquid and is often used to hedge real and emerging market risk.

Bind

Some US dollar-denominated Brazilian government and corporate bonds are traded on European exchanges and may experience price movements. Credit default swap contracts trade throughout the day, although liquidity is lower in the late hours. Here’s a list of some of the main ones to check out:

• BRAZIL 3 ¾ 09/12/31 (USD)
• BRAZIL 7 ⅛ 1/20/37 (USD)
• BRAZIL 5 ⅝ 7/1/41 (USD)
• PETBRA 6.85 06/05/2115 (USD)
• PETBRA 5.6 03.01.31 (USD)
• VALEBZ 3 ¾ 07/08/30 (USD)
• BANBRA 9 PERSONS (USD)
• BRAZIL CDS USD SR 5J D14

ETFs

There are some ETFs traded in Asia, Europe and the US that track Brazilian assets. Here you can see them:

• iShares MSCI Brazil ETF (US)
• Next Fund Ibovespa Linked ETF (Japan)
• Franklin FTSE Brazil ETF (US)
• Direxion Daily MSCI Brazil Bull 2X Stocks (US)
• ProShares UltraShort MSCI Brazil Capped (US)
• iShares MSCI Brazil UCITS ETF USD Dist (London)
• HSBC MSCI Brazil UCITS ETF (London)
• Lyxor MSCI Brazil UCITS ETF (Paris)
• Xtrackers MSCI Brazil UCITS ETF (Germany)

Stocks

There are depositary receipts issued by Brazilian companies trading abroad.

• Petrobras (Germany)
• Valley (Germany)

involvement in Brazil

Stocks of companies that rely on Brazil for a significant portion of their sales could be active:

• Asia
  • Wireless Energy, Nihon Nohyaku
• EMEA
  • Carrefour, Casino, AB-InBev, Home24, Santander, Telefonica, Telecom Italia, EDV, Stellantis
• North America
  • Sea Ltd., Arcos Dorados Holdings Inc., MercadoLibre Inc., Mosaic, XP Inc., PagSeguro Ltd., Nu Holdings, StoneCo, Inter & Co., Arco Platform, Afya, AES Corp.

(Updates with partial voting results in second paragraph.)

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