Surprise!
Brazil’s central bank, Banco Central do Brasil, raised its benchmark Selic interest rate by only 0.5 percentage points yesterday to 10.75%. Expectations had been for a 0.75 point increase.
The consensus is that the smaller than expected increase in rates is a signal from the bank that the bank will stop raising interest rates earlier than expected and short of the 12% rate previously forecast.
The surprise is a result of a surprisingly fast drop in Brazil’s inflation rate in response to higher domestic interest rates—and to slower growth in the European economies as a result of the euro debt crisis. In the 30 days that ended in mid-July consumer prices fell to 0.09%. The drop small as it was, was the first drop in inflation in four years.
Investors who have been waiting for an end to Brazil’s round of interest rate increases have, as of 3 p.m. ET, bid Brazil’s Bovespa stock index to its biggest gain in six weeks.
I’d agree that the bank’s 0.5 percentage points rate increase is a signal that the Banco Central intends to end rate increases sooner rather than late. If you’ve been waiting to buy Brazilian bonds until the bank was done, I think it’s now reasonably safe to get into the water. (Buying Brazilian bonds though, isn’t exactly easy, if you aren’t a resident of Brazil. As soon as I figure out how and have some method and agent to recommend I’ll write a new post.)
The signal also removes some risk from Brazilian stocks. I’m not in a rush to buy because Brazil’s stock market is currently closely correlated with China’s stock market and China’s market is still at sixes and sevens over the direction of government monetary policy. A few more weeks could resolve the Chinese quandary. Having waiting this long, I’m willing to wait a little longer.
Thanks for ALL above comments.
As I said, I wrote what I read. They are all things that I read somewhere, often from very reputable places. I did not claim as an expert, but I do tend to keep my information from being washed away by fast news cycles and I connect the dots. Use the recent NYT article as an example (link in my above post) to show how I process things that I read, how I connect the dots and where I draw the lines.
What I learned from the article are not honor killing and caste which are not news to me, but village elders can control their villages’ votes or “blocks of vote”. (Read the article carefully.) Unless you tell me it’s a fiction, it does give me some idea on how India’s election works at some places. Did I draw conclusion that all India’s votes are fixed? Of course NOT. Behind everything that I wrote, there is a process of information analysis which keeps and stores creditable information and eliminates untrustworthy one. This NYT’s report on village elders’ control of votes is likely to be kept and stored in my head. Next time, when the same subject comes out, it’s very likely that I pull it out for comparison (Actually I have read couple of reports on that matter.) Another thing that I learned from the article is that how strongly some Indians stick to its tradition even if it’s things like caste. (Actually this is not the first time that I learned about it either.) Read carefully how the accused family responded in the article. The tradition existed longer than the constitution, therefore tradition (not constitution) should be followed. Unless someone tells me this report is untrue or rare case (BTW, NYT made it clear that it’s common), this information is also likely to be stored in my head and compared in the future. But does that mean I think all Indians are like that? Of course NOT.
If anyone learned about honor killing or controlled votes or even amused by newspaper ad placed by parents recruiting future mates for their children from this NYT article and repeated it later somewhere, will you call him/her “India basher” or “having an anti-India agenda” or even “prejudice against India”? If yes, I suggest you to tell NYT not to print that kind of articles again. If no, then why should I be called such? I basically did same thing. I think we are all “judgmental”.
I welcome first hand experience (the pizza story, etc.) and I of course welcome correction of any inaccurate or misinformation. Providing summery of your counter information is the best way, name callings are not going to prove your points.
CALLOFDUTY:
I like your pizza experience in India. (I’d like to see more of that kind.) I have heard of Domino’s emerging market expansion doing well but I did not know it’s also doing well in India. Proves my point, basic consumer goods will do well there. I am also glad to hear that Bangladesh people are thankful to India’s help. According to what you implied, because Bangladesh people is happy with India, so should the rest of the world on that matter. No problems. I am happy things worked out well for both. But can we also apply the same standard in nearby Afghan? Pakistan reportedly is very actively involving in Afghan’s internal affair aiming at influencing (if not controlling) that country once US withdraws. That causes great concern in India (in US too). I read only few days ago on MSN that a proxy war may break out in Afghan between India and Pakistan once US leaves, obviously because India can not sit back and watch Pakistan influencing Afghan. I think we can bet on that once US leaves, Taliban will control Afghan and you can further bet on a close relationship with Pakistan. Should India sit back and let Pakistan influence Afghan?
Regarding Tata motor’s new factory, I also heard of Maoists’ presence in West Bengal which actually proves georic’s point. But the Tata story was reported as one of the land dispute cases in this Business Week article (http://www.businessweek.com/magazine/content/09_42/b4151038045277.htm). I am little disagree with your comment that Tata’s relocation is same as foreign car makers investment in the south instead of Detroit. Tata’s had to abandon of its already selected factory site and relocate to another. Compare to that, foreign car makers SKIPPED the union dominated Detroit area and wen to the business friendly south at the first place. (They may have some suppliers in the north though), These two are not exactly same. It actually shows a potential risk or extra cost for companies planning factories in India that they may have to relocate as Tata did.
I let you ALL have the last words.
Ok Ed thank you for your comment about non-transparency showed by Indian companies that hinders one from investing in it. I am not even a beginner in investing so I cannot say for sure that it could be true. But I value your opinion highly in the matter of investing.
YX: I can understand there are a lot of problems in investing in India. One should not invest if they eye so many problems in financial areas.
But why are you so hell bent on bashing India upon thousand year old tradition. Just look at US. It was established by wiping off all the Native Indians and their establishments. Most of them right now leave in reserves, where they get free money and land. So they remain drunk and retarded. That’s what happens when you give people free money (communism, socialism, etc.)
US has used nuclear bomb and other lethal weapons in so many countries and it is selling so many weapons it is unimaginable. China, Japan, Russia, France and US are producing highest number of lethal weapons than any other country in the world. US is trying to spread peace by fighting wars. Vietnam, Iraq, Afganistan, etc. It has recently started heavy naval exercise with S. Korea just yesterday or day before. Do you think all these are intentions to leave peacefully. My point is that compared to India all these countries are much prone to attack. Still we invest and leave in these places. I leave in US but I don’t want my son to be reading about his country (US) being the aggressor. I say his country because I dont have a green card yet. If other countries don’t want democracy let them leave in stone ages and fend themselves. Forced democracy is a kind of dictatorship too. Anything forced is violent.
India has more number of muslims than Pakistan. They won’t find the freedom that India offers them in Pakistan. Abdul Kalam Azad a muslim minority in India was the best president India had. People are proud of him in India. He helped ISRO (Indian space research center) tremendously and he was a scientist himself. Manmohan Singh is a Sikh (a minority) and currently Prime Minister of India. Indira Gandhi (a woman and daughter of Nehru) became prime minister in India and remained of 17 years with a short gap of 2 to 4 years WHEN WOMEN IN USA DID NOT HAVE A RIGHT TO VOTE. Sure there is nepotism and lot of countries have that in politics. I am bringing out these facts so you know that you cannot look with a prejudice otherwise the study would be flawed. Sure honor killings are contemptful and cannot be allowed. But a country just doesn’t get built in a day or so.
I don’t hate US but I certainly love India. India would have made a very good neighbor to US. But dreams are dreams.
YX: you certainly have prejudice against India not only investment wise. That is for sure. I would like to discuss more. Your international study is tremendously flawed. You can call me on my cell phone: 404-512-9024. Whenever you get a chance in this life time.
I want to be a world citizen and not belong to any country. But I certainly know the beauty of US and beauty of India too. And their ugliness too. I won’t write peace at the end because peace comes only when one remains undisturbed in all situations without exception.
I am sorry Jim and others that you had to read this long comment. But facts have to produced in defense.