Goldman Sachs Sees Record Brazil Trading After Bolsonaro Lead

Goldman Sachs’ Brazil trading desk saw record activity after Sen. Flávio Bolsonaro took a narrow first-round lead over Luiz Inácio Lula da Silva, as foreign investors moved into Brazilian assets ahead of the Oct. 25 runoff.

Trading volume reached $8.7 billion a day, while regular-session volume on the Monday after the vote reached a record $20 billion. Foreign inflows reached $2 billion that day.

The desk described the period as its busiest week ever in Brazil following Bolsonaro’s unexpected lead. EWZ rose 12.5% in one day; since the fund began trading in 2000, five other one-day gains have exceeded 12.5%.

The rally was driven by foreign inflows rather than a rebound from a sharp sell-off. Goldman Sachs was the largest net buyer of Brazilian-listed stocks over the following three sessions, supported by nearly $700 million in demand for custom baskets.

Interest was also strong in Brazil rates and equity indexes. Those measures outperformed the Ibovespa index and EWZ by more than 15% since the election.

Brazil’s medium- and long-term interest rates fell 150 basis points over two weeks. The spread between Brazil’s 10-year bond and the U.S. 10-year Treasury stood at about 7.2%.

Bolsonaro and Lula are set to face each other in the Oct. 25 runoff. Bolsonaro faces four challenges: securing the runoff victory, assembling an economic team, proposing a workable fiscal plan and gaining congressional backing to enact it.

His coalition strengthened after four center-right parties endorsed him. São Paulo Governor Tarcísio de Freitas told Bolsonaro, “We can’t be part of a lost generation,” and added, “We have to deliver on the work that your father started.”