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

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