Hot money surged into Brazil's stock market bubble billowing

The Central Bank of Brazil, recently said that, with Brazil's economy grew out of the impact of financial crisis, Brazil 2009 net inflows reached $ 287 billion. Financial field to accept a maximum total of foreign investment, foreign capital entering Brazil 3363 billion to purchase stocks and funds, drain the 3175 billion dollars, making the area a net inflow amounted to $ 188 million, for the last 30 years.

The inflow of foreign capital has continued, with the obvious intent of arbitrage, how to deal with the financial community to revive Brazil foreign "hot money" issue. Brazil's President Lula emphasized: "foreign investors see Brazil economic good, just to hurt, they bring dollars into real, into Brazil's stock market, 30 days after the earned money into dollars away. Such practices, Brazil is not welcome. ”

Foreign investors push up Brazil's stock market

As a resource-intensive countries, Brazil and Australia, New Zealand and other countries together became one of the first to recover from the financial crisis on the economy. In addition, Brazil 2014 World Cup organised and Brazil Rio de Janeiro city for the 2016 Olympic Games to promote foreign capital focusing on Brazil, want to share.

Based on these years of average number of foreign investment accounted for Brazil Sao Paulo stock market 30% of the total funds. 2008 may 20, Paulo stock market once climbed to 73516 points, reached the highest in history. At the end of that year, with the financial turmoil and stimulated the rapid withdrawal of foreign capital, causing annual net divestments 488.8 billion, while causing bowei Spa stock index was miserable to 29000 multipoint.

Since 2009, Brazil's economy, Brazil's withdrawal of warmer "hot money" accelerated return. From March to October, approximately 200 billion capital inflow, Brazil's stock market, bowei Spa index push up to 67239 point from the beginning of this year, an increase of 79%. Influx of foreign investment in Brazil in the market competing to subscribe new shares. In early October, Spain Santander Bank Brazil branch in Brazil's stock market to issue new shares, attract large numbers of foreign investment and immigration, to absorb funds reached a record 80 billion.

Brazil's Central Bank, Ministry of Economic Affairs in charge of Altamira · Gropius believe: "foreign investment flows into the basic focus in the stock market, this situation is mainly the economic performance of Brazil, as well as investors anticipated, Brazil's stock market has become very attractive. ”

2010-1-4, Brazil Sao Paulo stock market following the holiday after opening, bowei spar rising stock index on 2.12%, surpassed 7 million points mark to closing, 70045 become since June 2008.

Brazil financial Institute Professor Ricardo · Torres pointed out that Brazil is expected this year's economic growth rate of 5%, coupled with the employment market, strong domestic demand, these positive factors contributed to the São Paulo stock market for fast recovery. Brazil the largest circulation in the São Paulo newspaper said that Europe and the economic prospects of underachieving, Brazil and China and other emerging powers to become idle to avoid risks and profits of safe havens.

Export of local currency appreciation to suppress

A large number of US dollars into Brazil, promoted Brazil – a real dollar. According to statistics, 2009 real against the dollar by about 25%, become Australia $ against the dollar, the world's second tallest currency.

Real appreciation too quickly, to Brazil export industry extremely difficult. Brazil's development, industry and foreign trade Ministry announced on 4 January, 2009, Brazil exports 1522.52 billion, imports, trade surplus of $ 1276.37 246.15 million, and the foreign trade surplus 249.56 2008 us down 1.4%, its lowest level since 2002.

As one of the pillars of Brazil's economy, Brazil's agricultural export 9.8% decline in 2009, only $ 647 million, mainly due to the financial crisis, the real appreciation too quickly lead to Brazil agricultural prices in the international market, lack of competitiveness, it is impossible to ignore the factors.

Brazil Finance Ministers ' manteiga repeatedly stressed, the real appreciation while helps the Government to control inflation target, but the strong real will weaken Brazil manufactured export competitiveness, seriously affecting Brazil industry to recover from the financial crisis. Brazil's Central Bank 4 January release of the latest issue of focus reported that Brazil fell last year industrial areas 7.62% validated manteiga warning.

As a result of the Government of Brazil, the floating exchange rate policy of the Government intervention is the only practices through Brazil's Central Bank acquisitions or sell US dollars to block real sharp fluctuations. In the second quarter of 2009, in view of the considerable inflow of $ Brazil, Brazil's Central Bank in May's intervention, through buying dollars to prevent real fast appreciation. From May to the end of the year, Brazil's Central Bank has acquired a total of 275 billion, accounting for $ net inflows of 95%. However, this is in addition to further push up Brazil's foreign exchange reserves, to prevent foreign immigration cannot play any role.

Brazil on the taxation of the "hot money"

From October 20, 2009, São Paulo, Brazil on entering the stock market and buy fixed income fund's foreign capital levy of 2% of the financial activities of the tax. Matt strengthen Brazil Finance Ministers stressed that this measure is to avoid Brazil financial market "overheating" to prevent speculative foreign potential risk, Brazil does not produce areas of foreign direct investment financial tax levied.

This measure is introduced, to a certain extent, to prevent the hot money surged into the role. According to statistics for the month of November, 2009 foreign capital inflows significantly reduce, the proportion of foreign capital decreased to 28.1% since December 2004, the lowest point. But Brazil's Central Bank statistics also show that the majority of foreign capital into Brazil is entered before the month of October.

Brazil Vargas University finance Professor and Deloitte company senior investment advisor Ronald huasheng noted that 2% of the financial activities of the tax may seem insignificant, but in practice is a very high proportion. It means that the foreign capital investment in the foundation year if interest rates as

8.75% of Brazil's public bonds, 83 days no income, therefore, the investors in order to guarantee the profitability will be forced to in Brazil financial markets remain longer.

However, blocking "hot money" for the Government of Brazil, is still a long way to go. Put the "Washington consensus" of the famous United Kingdom economist John · Williamson believes that Brazil can be directed at foreign financial activity tax increase to 4%, or even 5%. He said that for the Suppression of hot money fast inflow, 2% is not enough, in order to achieve the effect, at least have doubled.