Archive for the ‘Brazil’ Category

Brazil confirms hydrocarbon strategy

Santos basinMuch has been made of Brazil’s offshore hydrocarbon deposits particularly in the Tupi oil & gas reserves which have been touted by state owned energy firm Petrobras as containing up to 5-8 billion barrels of recoverable oil.

Tupi,which is located in the pre-salt region, is estimated to contain between 5 billion & 8 billion barrels of light crude, & is the world’s biggest new field since a 12-billion-barrel find in Kazakhstan in 2000. The pre-salt region covers an offshore area 800 kilometers long and 200 kilometers wide between the states of Espirito Santo and Santa Catarina, is estimated to contain up to 80 billion barrels of light crude under a thick layer of salt far beneath the ocean floor.

As discussed in a previous article, Petrobras (NYSE: PBR)  & partners including Repsol and BG Group discovered vast deposits of oil under more than 4,000 meters of water, rock and salt in 2006. These deposits are at previously untapped depths and will be costly to extract. It is thought that other reserves may be nearby in other as yet unexplored blocks.

To capitalise, Brazil’s regulatory agency the ANP has announced that it will be excluding Tupi from a new round of block concessions scheduled for spring 2010, as Brazil looks to protect it’s strategic reserves & is currently changing the concession framework for blocks in the area. According to proposed legislation, which is being heavily pushed by President Lula, Petrobras will operate all blocks in pre-salt areas with a minimum 30% stake. Output would belong to the federal government under a production sharing model & participating IOCs will receive a fixed share of the revenues.

This is a canny move & possibly a very good gambit to make, as IOCs are now on the backfoot with new capacity for exploitation becoming scarce. More tellingly, companies such as Royal Dutch Shell, Total, Chevron & Exxon Mobile have come under increasing pressure in countries such as Nigeria & Angola in recent months, especially from Chinese state firms.

Last month, CNOOC, made a bid to acquire concessions in 23 prime blocks in Nigeria, which could see the Chinese state-controlled oil giant securing more than 20% of Nigerian hydrocarbon assets. There has been some speculation that Nigeria may be using the Chinese approach as a heavy hammer to extract more favorable terms on concessions that are due for re-newal, however, it underlines the fact that oil majors must look for more stable environments in which to do business.

ANP Director Nelson Narciso has expressed confidence that oil majors will still be interested in new pre-salt areas despite market uncertainty over the new terms because of both economic & political stability.

“As long as the production sharing agreements are preceded by a fair competition, there is no reason for not being happy with Brazil,” he said. “I expect that if everything goes well, by the end of next year we’ll be in a position to start the bidding for the new pre-salt round”

Lula has a knack of getting his way, as he is seen as being instrumental in pulling Brazil out of the global recession via his socialist policies, which have been very popular with Brazil’s citizens. Our view is that the IOCs will be forced to accept these terms on the pre-salt fields, whilst picking up other concessions in more mature blocks as a sap. We have been bullish on Petrobras for a good while & we see no rason to change that view on the basis of this news.

 

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Positive figures from Redecard will push Brazilian retail bank shares

redecardAs we have discussed in previous articles, Brazil’s retail banking sector has been enjoying a buoyant 2009 so far. This would seem set to continue as payment card processor Redecard posts an 18% jump in financial volumes.

This should be seen as a positive for Itaú Unibanco (NYSE: ITUB), which controls Redecard, as net income for the third quarter rose to BR$333M ($195M), with financial transactions across the payment platform registering BR$ 24.7Bn ($14.52Bn) & more interestingly, the debit card side rising in step by 17% to BR$12.2Bn ($7.13Bn).

Although there is general negativity on global credit card companies, particularly in Western economies, Brazil’s nascent credit sector has benefitted from a wave of bank consolidation over the last 18 months, the strength of the real versus the US dollar & one of the strongest economies to exit the finiancial crisis. Earlier this year, Visa affiliate VisaNet was the star IPO on the BOVESPA, with the launch being hugely oversubscribed by both retail & institutional investors, raising a record of $4.5Bn.

“We think the results were solid and highlight the strength of the credit and debit card markets,” reported Deutsche Bank which keeps a buy rating on Redecard. “While regulation remains a key risk, we think that it is already priced in.”

For Redecard, it is also very much a case of being seen as a Brazilian brand, which seems to be helping it’s positioning against VisaNet, which although no longer owned by Visa, retains the association. Redecard has the benefit of being able to position itself as a multi-brand entity & is more popular with Brazilian retail customers, especially in the growing debit card sector, whilst VisaNet is to some extent still regarded as a premium brand.

So, short term one-up for ITUB & we expect to see shares taking a ride higher over the next few days. VisaNet reports later this week (October 28th), so it will be interesting to see if Bradesco will be able to catch the same sentiment wave.

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HP expands ProCurveOne operations into LatAm

ProCurve-logo-Hewlett-Packard has announced that it will be expanding it’s sales operations for networking division ProCurve from Mexico into the rest of Latin America of its networking division, ProCurve, beyond Mexico. ProCurve products & services will now be available in Argentina, Brazil, Chile, Colombia, Peru, Venezuela & Costa Rica.

“We know we will be using a direct and indirect sales strategy as the ProCurve product line is extensive, and in some cases allows for both sales models,” said Alfredo Yepez, who manages HP’s Lat-Am Enterprise Storage & Servers operations. “Many of our channels today have some type of specialization in the networking area as they have previously distributed solutions from our competitors and are interested in representing ProCurve. So we will leverage the relationship with our current partners that have experience in the networking business as a first step, and then develop other partners in a second stage”

The company has recently lunched HP ProCurveOne, which is a flexible suite of applications from leading ISV’s, including Microsoft,Avaya, McAfee, F5 and Riverbed, that can be integrated into the existing architecture of Enterprises, with management being provided by a central platform.

The new approach from HP (Nasdaq:HPQ) seems likely to pay off, as Felipe Ortega, Manager ProCurve of the recently opened R&D centre in Costa Rica reported, even without selling solutions across Latin America, the company has managed to become the second largest provider of networking products globally, after Cisco (Nasdaq: CSCO), in terms of both revenue & market share.

“We are also developing high-speed chips for networks, software solutions for management and connectivity monitoring of large datacenters. The fourth area is networking security for both wired and wireless networks,” he added.

Original article at MyStockVoice

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Brazilian Banking, a tale of IPO’s & ADR issues

banco do brasilState controlled banking behemoth Banco de Brasil has been involved in a three way battle with it’s private peers Itau-Unibanco (NYSE:ITUB) & Banco de Bradesco (NYSE:BBD) for some time for dominance in the growing domestic banking sector. Having surpassed ITUB in the second quarter, mainly due to lower interest rates attracting borrowers, Banco de Brasil has now announced that is looking to change it’s stance regards international stockholders.

Yesterday, a spokeswoman for the company revealed that the bank is now looking to double the potential foreign ownership in Bovespa traded shares from the current 11% by raising it’s free float of shares to 25%.

On the same call, she also advised that the bank has appointed an advisory bank regards launching an ADR offering on the NYSE, similar to it’s two biggest rivals, the programme could be launched by the end of this year.

“We are talking about two movements that aim to improve the attractiveness of the shares,” Marco Geovanne Tobias da Silva, said in a telephone interview with Bloomberg. “We are increasing the number of potential investors to our shares.”

Banco de Brasil has performed well this year, having outperformed the Bovespa average by some margin. As we have discussed in previous articles, the banking sector in Brazil has been going through a wave of consolidation & the state bank has just added to its growing portfolio via the acquisition of a 49.99% stake in Banco Votorantim for 4.2 billion reals ($2.3Bn) earlier this month.

Meanwhile, Spain’s Santander (NYSE:STD) is now looking at a local IPO that should see an initial raising of $200 million (equivalent to 15% of current valuation) that will be used to expand its reach across the country. At the same time, Santander also said that it will launch an ADR programme for the local listing.

With only a single IPO so far this year with Visa affiliate VisaNet, Brazil now has 12 companies that have registered since the end of July for potential listings. The VisaNet launch was hugely oversubscribed & raised a Brazilian record of $4.5Bn in its sale, much to the benefit of Bradesco.

Much of this is fuelled by local retail interest, as the Brazilian middle classes are growing, however, there are also signs that foreign investors are looking at Brazil as the next BRIC economy to really get going, with Credit Suisse (NYSE:CS) coming out with a bullish statement yesterday.

“Brazil is in style for foreigners,” said Ilan Ryfer at Credit Suisse Hedging Griffo, Brazil’s biggest hedge fund. “Everyone thinks it’s a bull market again and the party’s back. Investors have short memories.”

Much of the excitement around Brazilian stocks is fuelled by its BRIC partner China, as the Chinese economy starts to lift again, commodities are very much back in vogue. South Africa’s Investec Asset Management is looking at Brazil & neighbours Chile & Peru to lead the way in South America, as Chinese demand for raw materials is set to grow.

So Viva Brasilia !! & being a bull on emerging markets & Brazil in particular, I am looking forward to the Banco de Brasil & Santander IPO’s with great interest.

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Brazilian banking, a two horse race

itau-unibancoBrazilian banks have been on a tear this year, with both Itau-Unibanco & Banco de Bradesca returning more than 100% year to date. As the “B” in BRIC, Brazil is thought  to be coming out of it’s recession, with The Economist stating that the country could see a return to 4%-5% in 2010, as Brazil is less dependant on the US as an export market & is forging ties in Asia, notably with China on energy accords.

Over the last month however, ITUB & Bradesco, the number 1 & 2 private banks, have been dragging, with ITUB being hit yesterday by the general market malaise, shedding 2.3% over the session. The overall negative sentiment on Brazil in August was not helped by President Lula‘s much discussed plan for the government to take greater control of oil reserves via the worlds fourth largest oil company Petrobras, which has seen some investors pulling back on Brazilian ADRs.

There are reasons to be bullish however, as Finance Minister Guido Mantega commented last week that Moody’s Investors Service is signalling that it may upgrade Brazil to investment grade. The banking system has been going through a wave of consolidation, with state owned Banco de Brasil jostling with ITUB & Bradesco for the top spot, all helped along by an 8.5% interest rate.

Bradesco has done well with it’s half year results, beating analyst estimates, mainly propped up by it’s sale of a partial stake in VisaNet, the Brazilian Visa affiliate, which provided the bank with a much needed $1.5Bn cash injection. Bradesco still retains a 26.5% stake in VisaNet after the IPO.

“The worst might be over in terms of defaults,” Chief Executive Luiz Carlos Trabuco Cappi said in a conference call with journalists. “With the formal economy and wages growing, the trend for default rates after reaching the peak is to edge lower.”

Similarly, Itau-Unibanco had a healthier than expected half year, with profits only dropping by 14%, mainy due to bad debt provisions,, which had doubled on 2008. Lending is expected to expand 10% to 15% in 2009 and should grow as much as 25% next year as Brazil emerges from recession, Chief Financial Officer Silvio de Carvalho said in a conference call with journalists.

“We have clear signs that credit has become an important factor in the economic recovery now underway,” Carvalho said. “Everything leads us to believe that the crisis is behind us.”

Looking at both of these stocks, they have both been recording higher lows & higher highs for the last 6 months, which to me makes them aln attractive prospect. Add in the positive sentiment from Moody’s, Fitch & Standard & Poor regards the Brazilian economy & there is certainly a feeling of comfort there.

ITUB_Trend

Looking at ITUB in particular, their ambitions to become a full service provider in all aspects of financial services took a step further last week when the bank merged it’s fledgling insurance business with specialist firm Porto Seguro, allowing it to now offer health & life insurance products to it’s 50 million customer base, this only 3 days after Bradesco & Porto had ended similar talks.

“The two companies have a lot to explore together,” said Kelly Trentin, a banking analyst at the SLW brokerage in Sao Paulo. “Financial stability in Brazil and rising family income make it more likely that people will look for more insurance products.”

So for me, Itau-Unibanco is the horse to back in this race right now.

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MyStockVoice.com is now alive & kicking

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It’s taken a while & it’s been an interesting experience, but am pleased to say that we released MyStockVoice.com into public beta. For me personally, there have been a few challenges, “assisted” along the way by re-locating with my family from Switzerland to Slovakia.

The team at Connection Services who have designed & support the MSV platform have been excellent, especially when responding to an ever changing set of requirements. MyStockVoice started as this WordPress blog, where I could muse on my views on Emerging Markets & BRIC economies. A conversation with a friend who works in the City (London) encouraged me to look at doing something a little more. The original format, was a forum, then a newswire service & now it’s a fully fledged blog publication platform. So you can imagine how happy my colleagues at CSL were, when I tripped back every few months & said “right, this is what we are doing now”

Our aim at MSV is to provide an ever widening audience with value insights into what is rapidly becoming a major topic for hedge funds, investment managers & retail investors alike : BRIC & Emerging Markets. International stocks traded on US exchanges are becoming ever more popular, especially via Depositary Receipts (ADR,ADS,ADN) , for the more cautious or long minded, a number of ETF (Exchange Traded Funds) have sprung up to service the appetite to take part in these growing economies.

Covering all the major regions, MSV provides focussed channels into a variety of sectors & also specific categories for Macro Econmics, ADR & ETF investing. We are pleased to be working with some well established names from the investment community, along with faculties such as Knowledge at Wharton, the Economics Faculty at Beijing University, Skolkovo Business School in Moscow & Cranfiedl University in the UK.

Our strapline is “your community … your voice”  & to reflect this, we will be bringing our readers plenty of new unique content. Much of my time in the last two to three months has been spent contacting individual bloggers & also online media services that are based in the regions covered. In this way, we can present a “blend of thought”, that will allow our subscribers to formulate informed opinions on their own particular areas of interest.

So, enough jawing from me, but to close, Alex, Chris & myself would like to thank the team at CS & all the people that have had input into the project. We sincerely hope that you enjoy the MSV experience & are always open to new ideas, partnership opportunities & most of all feedback.

Many thanks

Paul

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Vale to sweep up as Rio “fails” in Chinese espionage fiasco

bulk ore carrierThis post from China News Wrap is significant, as it’s sourced locally from International Financial News, which is a Peoples Party owned newspaper. China informs Australia that proof is irrefutable (sic) Basically the Chinese authorities are not going to back off, having been snubbed over the Chinalco deal. I reckon this will run & be very detrimental for both Rio & BHP Billiton. Anyyone else noted that both firms have been talking up inventories being built up elsewhere ? The real deal is in the 2nd last paragraph of the story :

“At the same time, although Rio Tinto had made statements last week emphasizing that it would ‘continue its iron-ore operations in China’, the actual situation does not seem to reflect this. The overseas media yesterday reported that shipments of spot market iron-ore from Brazil to China soared to record highs in July, which could be related to the Rio Tinto case. Australia seems to have temporarily suspended its exports of spot market iron-ore to China. Data from the shipping company AXSMarine indicates that orders for shipments to China from Australia’s main iron-ore port fell to 12 this month, while orders for shipments from Brazil reached the record high of 31. This means that China’s demand for iron ore is still strong.”

so basically VALE is picking up the slack & would also seem to be enjoying it too, if this piece from Reuters is anything to go by :

Vale Resists China Price Cut Request on Demand Gain

“Politically Vale has done well with its customers by letting the Australians settle first,” Cliff said. In the first quarter, China took 66.5 percent of Vale’s total iron-ore sales of 52.1 million metric tons, up from 32 percent a year earlier.”

Regular readers of MyStockVoice will know that I’m a big fan of Vale, so, long VALE is a no brainer & I have felt that BHP is a little toppy for a week or so, may instigate a short. RTP I’ll leave for bigger fish to swim with.

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