16 Jun 2020
Posted in Banking
Brazil’s struggling economy sees consumers turn to safer investments, says GlobalData
Brazilians are seeking the shelter of retail deposits, as its already weak economy has been shaken by the COVID-19 crisis, according to GlobalData. The pandemic has brought its economy to a standstill, which has caused sharp declines in the financial markets
GlobalData’s senior wealth management analyst, Heike Van Den Hoevel, commented: “The ongoing loss of productivity that is expected over the coming months will continue to have a negative impact on demand for risk assets throughout the year. We have lowered our retail equity and mutual fund holdings forecast to -23.2% and -8.6% respectively for 2020.The less pronounced decline in mutual fund holdings can be attributed to the asset class’s exposure to fixed-income investments.”
GlobalData expects retail deposits, which accounted for 39.1% of Brazil’s retail holdings I December 2019, to benefit from a flight to safety. We forecast deposit holdings to grow by 14.4% over our forecast period, to reach a share opf 44.5% of the overall retail mix.
“A similar trend was seen during global financial crisis, when holdings rose by 9.5 percentage points between the end of 2007 and 2008. We expect a similar flight to safety in the fixed-income space, with retail bond holdings increasing its share of the retail mix to 8.9% in 2024. However, we expect financial volatility to subside by 2021, deposit and fixed-income holdings growth will normalize as investor demand for risk assets picks up,” Van Den Hoevel concludes.
Information based on GlobalData’s report: Covid-19 Sector Impact: Retail Savings & Investments – Brazil