The real suffers as funds flow out of Brazilian equities

Between the deadly floods in Brazil's south and concerns about fiscal stress, the nation's stocks have been sinking. The outflow from Brazilian equities is having an effect on the currency, as well.

We have constructed two charts on Brazilian equity and bond fund flows using data from EPFR, which has recently been added to the CEIC platform.

According to EPFR, Brazil experienced a USD 3.1 billion net equity outflow from investment funds as of mid-June 2024. This has coincided with steady depreciation by the Brazilian real. USD/BRL stood at 5.39 on June 12, down from 4.95 four months earlier and the weakest level since January 2023.

External and domestic factors were helping drive this trend even before the tragic flooding began in late April. The Lula administration has been relaxing fiscal targets amid escalating expenditure. Meanwhile, the Federal Reserve has yet to start its rate-cutting cycle, which would usually help funds flow into emerging markets more broadly.

The bond market – and bond funds – have presented a more stable picture in absolute terms. EPFR data shows that Brazilian bond funds' inflow oscillated around net zero for much of this year. The year-to-date net inflow has recently risen to USD 139.9 million amid expectations that interest-rate cuts will need to stop.

However, as our second chart shows, asset managers have been reducing the allocations to both Brazilian equities and bonds in Latin American-focused funds since November 2023.

The EPFR datasets available on CEIC cover more than 151,000 traditional and alternative fund share classes accounting for more than $52 trillion in total assets – delivering a complete picture of the institutional and retail investor flows and fund manager allocations that drive global markets.

Explore more data and visuals:

EPFR Fund Flows and Asset Allocation

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