Equity analysts virtually all agree that investors will return to Bovespa as soon as the second round of the presidential election is over. They forecast a rally whatever the result. Telecoms represents more than 45% of average trading volume and ought therefore to benefit, but downside potential is still there, they warn, and volatility will remain acute. One reason for the volatility is the renewed hope of a turnaround for the Government candidate, José Serra, now on 40% according to poll findings publicized by brokerage houses and other punters. Serra finished the first round on 23%, well behind Lula on 46%. This provides an indication of the fluctuations to be expected as the ratings change over the next couple of weeks.
In addition, many analysts have been influenced by the idea put about by George Soros that debt restructuring is ?inevitable? for Brazil. This feeds back into the exchange rate. If the São Paulo Stock Exchange Index (Ibovespa) finds a new floor below 2000 points in dollars, as some analysts believe it may, a strong wave of defensive buying could follow. It?s worth recalling that Brasil Telecom, Tele Centro Oeste Celular, Telefonica and affiliates, and Telecom Italia and affiliates are often cited as defensive investment options.