America’s slowdown and China’s rapid progress is good for Brazil, analysts say

The big problem in the markets in Brazil does not seem to be located here, but abroad, especially in the decisions of the Federal Reserve. But this picture may change. This assessment was made by Felipe Hirai, partner at Dahlia Capital, who participated this Monday (6). XP morning call.

“(Brazil’s) GDP estimates have been revised upwards. When you look at companies’ profits, they are very stable, coming in line or above expectations (in 1Q24). “The big limiting factor for interest rates going down in Brazil will be what happens to US interest rates,” he told the program.

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Inflation has eased again in the US

For the analyst, the data in the US is “slightly better, signaling a weaker economy, inflation returning to its declining pace, which will allow the central bank (Federal Reserve) to cut interest rates”. If this happens, he believes that interest rates here will also come down by the end of the year.

“It’s worth highlighting that we see the US economy slowing and the Chinese economy picking up a bit more,” he said.

“It’s very important to keep this scenario in mind. A slight slowdown in the US economy and a slight acceleration in the Chinese economy is very positive for emerging markets like Brazil,” he added.

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Capital flows to emerging markets

Felipe Hirai estimates that if this trend continues in the coming months, the flow of capital may shift to developing countries.

However, Hirai sees part of the Chinese economy as a “glass half full or half empty” dichotomy, depending on the perspective from which the market is viewed.

“One part of the Chinese economy is doing very poorly, which is related to the demand for iron ore. But another part of the Chinese economy is doing well, which is the manufacturing sector,” he explained.

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Chinese motivation

In fact, the Dahlia Capital partner doesn’t see much upside potential, especially for iron ore in China. “Our expectation is that it (price) will remain stable and hover around US$ 110 and US$ 120 (a tonne) for some time,” he said.

Paulo Kitz, Global Research Strategist at XP, participated in the event morning callLast week, China’s sovereign wealth fund found that buying stocks boosted Chinese assets.

Also, the boost came with the news that the government will introduce new measures to tackle the ongoing real estate crisis from 2021 onwards. “The market interpreted this as a potential interest rate cut and an increase in risk assets (in China),” he said.