B3 Stock Exchange Faces Challenges as Foreign Investors Retreat and Financial Volume Declines

The Brazilian stock exchange, B3, experienced a turbulent October in 2024. Financial volumes dipped, and foreign investors continued their exodus from the market.

This trend reflects broader economic challenges facing Brazil and shifting investor sentiments. B3’s average daily financial volume in October 2024 reached R$ 22.306 billion ($3.91 billion).

This figure represents a 3.9% decrease compared to October 2023. The decline was even steeper when compared to September 2024, showing a 3.1% month-over-month reduction.

The spot market for stocks, typically B3‘s largest segment, saw an average daily volume of R$ 21.427 billion ($3.76 billion). This amount marks a 4.2% year-over-year decrease and a 3.1% decline from the previous month.

Despite these challenges, B3 reported an increase in active accounts. The number reached 6.045 million in October, up 5.6% from the previous year.

B3 Stock Exchange Faces Challenges as Foreign Investors Retreat and Financial Volume Declines. (Photo Internet reproduction)

Individual investors, a crucial segment for B3, totaled 5.230 million accounts, showing 6.9% year-over-year growth. The number of companies listed on B3 in October 2024 stood at 426, marking a 5.1% decrease from the previous year.

This reduction could be attributed to various factors, including mergers, acquisitions, or delistings. Interestingly, despite fewer listed companies, the total market capitalization increased by 7.8% compared to October 2023.

It reached R$ 4.530 trillion ($794.74 billion). This growth suggests that the remaining companies have gained value or new listings have been substantial.

Foreign Investors Withdraw from B3

Foreign investors continued to withdraw capital from B3. In September 2024, there was a net outflow of R$ 1.671 billion ($293.16 million).

This exodus contributed to a cumulative deficit of R$ 23.172 billion ($4.07 billion) in foreign investment for the year up to September. The Ibovespa, Brazil’s benchmark stock index, has faced significant challenges in 2024.

As of May 29, 2024, the index had depreciated by 8.55%, marking its worst performance since 2013, excluding the pandemic-affected year of 2020.

Several factors contributed to this poor performance. These include delayed monetary easing in the United States, slower-than-expected growth in China affecting commodity prices, and uncertainties surrounding Brazil’s fiscal policies.

The market’s struggles have been reflected in the performance of key stocks. Vale (VALE3), which holds the largest weight in the Ibovespa index at 13.8%, saw a 14.42% decline in the year leading up to May 29, 2024.

Despite these challenges, there are some positive indicators for the Brazilian market. Moody’s recent upgrade of Brazil’s credit rating brings it just one level below investment grade.

This improvement could potentially create a more favorable environment for foreign capital inflows in the coming months.

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