The Stock Market In April 4n453s

The Stock Market in April So as not to lose the perspective of the longer term elements of the Brazilian Stock market in April, we will discuss developments through April 15th, and then deal with the events of April 16th separately and discuss their likely long term effects. The news in April has been positive, with the Ibovespa reaching 71,417 on April 9th. By April 15th the index had fallen back to 70,524, which reflects an increase in the month of 1.5%, and an increase in 2010 of 2.8%. This positive performance was fuelled by strong consumer growth numbers, good corporate earnings, and continuing predictions for economic growth of over 5.5% for 2010. Figure 1 Ibovespa in 2010 Up to and including April 15th

74000 Ibovespa

72000 70000 68000 66000 64000 62000 10 0 /2 12 4/ 0 1 20 5/ 4/ 10 0 /2 29 3/ 10 0 /2 22 3/ 10 0 /2 15 3/ 0 1 20 8/ 3/ 0 1 20 1/ 3/ 10 0 /2 22 2/ 10 0 /2 15 2/ 0 1 20 8/ 2/ 0 1 20 1/ 2/ 10 0 /2 25 1/ 10 0 /2 18 1/ 10 0 /2 11 1/ 0 1 20 4/ 1/

Source: Yahoo Finance

However, the shorter the period under review, the less well the performance of the Ibovespa has been, compared with other indices. For instance, Looking to the performance of six indices in 2010, we find [The indices chosen were the Dow Jones Industrial Average (“DJI”), and the Standard and Poors 500 (“S&P 500”) of the USA, the Financial Times and London Stock Exchange 100 Index (“FTSE 100”) of the United Kingdom, The Cotation Assistee en Continu 40 (“CAC 40”) of , China`s Hang Seng Index (“HSI”), and Brazil`s Indice da Bolsa de Valores de Sao Paulo (“Ibovespa”)]: Figure 2 Sock Market Performance, 2010 Up to and including April 16th

110.0% 105.0% 100.0% 95.0% 90.0% 85.0% /2 14

20 7/

20

10

1/ /3

09

0 01 /2 15 4/ 10 20 8/ 0 4/ 1 20 1/ 0 4/ 01 /2 25 10 3/ 0 /2 18 0 3/ 01 /2 11 3/ 10 20 4/ 0 3/ 01 /2 25 10 2/ 0 /2 18 0 2/ 01 /2 11 0 2/ 1 20 4/ 0 2/ 01 /2 28 0 1/ 01 /2 21 0 1/ 01

1/

1/

12

Source: Yahoo Finance

DJI

FTSE

CAC

HSI

IBOV

S&P

The S&P has grown 8.7%, the FTSE, 7.6%, and the Dow Jones 6.9%, and the CAC 40 has grown 3.3%, whereas the Ibovespa, as noted above has grown 2.8%. The only index that the Ibovespa has outperformed, of the six considered, is the HSI with a growth of 1.3%. Looking at the performance of the stock markets since October 20th, 2010, which was the date on which the Brazilian Government imposed a 2% tax on investments from foreigners, and a 1.5% tax on investors that buy Brazilian stocks outside Brazil (via depository receipts) we find in considering the same six stock markets: Figure 3 Stock Markets Performances, October 20th 2009 - April 15th, 2010

115.0% 110.0% 105.0% 100.0% 95.0% 90.0% 85.0%

0 01 /2 13 4/ 1 0 20 0 6/ 4/ 20 1 / 30 0 3/ 0 1 /2 23 0 3/ 20 1 / 16 3/ 01 0 2 9/ 3/ 1 0 20 0 2/ 3/ 20 1 / 23 0 2/ 20 1 / 16 2/ 01 0 2 9/ 2/ 01 0 2 0 2/ 2/ 20 1 / 26 0 1/ 20 1 / 19 0 1/ 20 1 / 12 1/ 1 0 20 09 5/ 1/ /2 0 9 /2 09 12 /2 0 2 /2 09 12 /2 0 5 /1 9 12 20 0 / /8 9 12 20 0 / /1 09 12 /2 0 4 /2 09 11 /2 0 7 /1 09 11 /2 0 0 /1 9 11 20 0 / /3 09 11 /2 0 7 /2 09 10 /2 0 0 /2 10

DJI

FTSE

CAC

HSI

IBOV

S&P

Source: Yahoo Finance

The S&P, the FTSE and the Dow Jones are all up 11.0%. The Ibovespa is up 8%, and the CAC 40 is up 5.0%. The HIS is down 1%. The area of opportunity for speculative capital has become the undervalued sock exchanges of the USA and the UK. Thus, foreign capital has flown, or returned to these markets as, compared to Brazil, and other emerging markets, the upside potential of the USA is currently greater. April 16th 2010 On Friday, April 16th the USA’s Security and Exchange commission filed charges against the investment banking firm, Goldman Sachs, claiming that it packaged mortgage obligations into a fund that was then sold to investors, with Goldman and other clients betting against the securities that were issued. Goldman vigorously denies wrong doing. Stock markets on Monday, April 19th opened lower on the news that the Financial Services Authority of the UK and will also investigate Goldman. The extent of the Stock Market losses on Friday was as demonstrated in Figure 4, below. The CAC 40 lost 1.94%, the Ibovespa and the S&P lost ground by 1.6%, the FTSE by 1.4%, the HIS, 1.3%, and the DJI 1.1%. The shares of Goldman Sachs lost 13% on the day.

4/ 1/ 20 4/ 1 0 2/ 20 10 4/ 3/ 20 4/ 1 0 4/ 20 10 4/ 5/ 20 4/ 1 0 6/ 20 10 4/ 7/ 20 4/ 1 0 8/ 20 10 4/ 9/ 2 4/ 01 0 10 /2 01 4/ 11 0 /2 4/ 0 10 12 /2 01 4/ 13 0 /2 4/ 0 10 14 /2 01 4/ 15 0 /2 4/ 0 10 16 /2 01 0

104.0% 103.0% 102.0% 101.0% 100.0% 99.0% 98.0% 97.0% 96.0%

Stock Market Performance in April

DJI FTSE CAC 40

HSI

Ibovespa

S&P