When investing, swap cold Coke for hot tea – 09/29/2024 – Marcos de Vasconcellos

We are used to looking to this side of the Greenwich meridian to think about the international economy. Will it be Donald Trump or Kamala Harris? What do the minutes of the Federal Reserve (central bank of the United States) indicate? What about the payroll numbers?

This is essential information from the largest economy in the world. But paying too much attention to them can make you ignore a simple habit, which usually gives me good indications about the Brazilian market’s performance: looking at the daily performance of Asian stock markets. Or rather, from China. It’s practical, by the way. As day here is night there, early in the morning we already have the closing data in hand.

Of course it’s not magic or simple mathematics. When the market is “moving sideways”, when the news overlaps with daily trading or on a holiday, it becomes more difficult to digest any data. But on ordinary days (they still exist) the value of this habit becomes clear.

This last week, for example, on the 24th and 26th we saw impressive increases in the main Chinese market index, called the Shanghai Composite Index. It rose 4.15% and 3.6%, respectively.

On the same dates, the Ibovespa, our main indicator, registered increases of more than 1%, after five consecutive falls, without very positive news from here, nor great emotions on the New York stock exchanges.

What triggered hearts and share purchases in the East and in Brazilian lands was the announcement of the Chinese government’s new stimulus package, to guarantee GDP (Gross Domestic Product) growth in accordance with the established target of 5% per year.

China plans to issue 2 trillion yuan (R$1.55 trillion) in sovereign bonds to raise money to facilitate the supply of credit, as well as relax requirements for purchasing and financing real estate.

This is because the real estate crisis is one of the obstacles to achieving planned growth — you must remember the crash that brought Evergrande to the ground.

And what explains the reflection of this good mood directly here (and not necessarily in the USA)? Sympathy? None of that. Growth in Asia means more sales for large Brazilian players. The main one on the list is her, always her, Vale. Real estate and industrial expansion demand steel, and producing steel, here or in China, requires more tons of iron ore.

Investors who had already seen the increase in demand went after the mining company’s shares and, in the last week, VALE3 shares rose 12%. As this is the most influential share on our Ibovespa, representing more than 12% of the index, it pushed the Stock Exchange towards its positive days, even without any exciting news here or in the USA.

China was the destination for approximately 30% of Brazilian exports (more than US$100 billion) in 2023, based on data from the Ministry of Industry, Foreign Trade and Services (Mdic). The US kept around 10% of what we sold (equivalent to US$36.9 billion).

For those who grew up in the “Coca-Cola generation”, programmed to receive what was pushed with “canned goods from the USA”, starting the day with Chinese tea can be a good change of habit.

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