Salient to Investors:
Brazilian small-caps are at 1.59 times book versus 3-yr low of 1.33 in June and the highest versus the Bovespa since February 2009. Consumer stocks account for 30 percent of the small-cap index, almost three times as much as their share in the Bovespa, where commodities producers account for 43 percent.
Herculano Alves at BRAM Bradesco Asset Mgmt likes Brazil best because its economy has growth in credit and wages, and the overseas economy isn’t growing. Alves said government boosting Brazil’s domestic market will push small-cap stocks higher because they are cheap relative to the U.S. and Europe, and despite the Bovespa being cheaper
Brazil’s small-cap index is at 20.8 times 2012 earnings’ estimates versus 24.9 for the S&P 600 Small Cap index and 29.4 for the FTSE Small Cap index, and versus 20.5 times for the Bovespa.
Roberta Kosaka at Banco Itau BBA expects the small-cap index to outperform the Bovespa for the next three years as Brazil’s growth improves while the global economy struggles.