Goldman Sachs: 'Hazardous' To Underweight Brazil - But Hold The Big Mac

By: TraderMark Tuesday, October 27, 2009 9:03 AM

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Despite a 73% increase in the Bovespa this year and the country raising taxes to try to keep out an avalanche of Western central bank liquidity (Oct 20, 2009: Ben Bernanke's Money Printing Parade Forces Brazil to Slap a Tax on Outside Investors), Goldman Sachs (GS) still says the shares are cheap. Certainly if EPS can grow 40%+ next year they might have a point, and who can argue against the fact this is one of the most attractive markets in the world.

Via Bloomberg

Brazilian stocks are inexpensive even after a 73 percent rally for the Bovespa index this year and cutting allocations may be "hazardous" for investors, Goldman Sachs Group Inc. said. "Forward valuations suggest it is hazardous to be underweight Brazil," Stephen Graham, a Sao Paulo-based analyst wrote in a note to clients. "Brazilian sovereign risk and interest rates are at or near record lows, while prospects for sustainable economic growth are possibly better than at any period in the last few decades."
The Bovespa may top 85,000 by the middle of next year, he wrote. That represents a 31 percent gain from the close on Oct. 23.

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