Brazilian Market Plunge Hits Israeli Investors in Two Mutual Funds
Translated & summarized from Calcalist by baba
Brazil's Ibovespa index plummeted nearly 15% after Luiz Inácio Lula da Silva's surprise presidential election win, impacting two Israeli mutual funds with significant Brazilian stock holdings. Ayalon Zvulun Foreign Stocks and Ayalon Zvulun Foreign Stocks - Dollar Denominated, managing a combined 365 million shekels, are expected to see sharp declines. The funds hold major Brazilian banks, energy, and mining companies, with one fund having over 60% of its assets in Brazilian equities.
The story in 5 lines · by baba
- Brazil's Ibovespa index fell 15% after Lula's election win, impacting Israeli funds.
- Two Ayalon mutual funds hold substantial Brazilian stocks, totaling 365 million shekels.
- Ayalon Zvulun Foreign Stocks - Dollar Denominated fund has 61% of assets in Brazil.
- The funds are expected to report significant losses on Wednesday due to the market drop.
- Lula defeated Flávio Bolsonaro in a surprise presidential election result.
Brazil's main stock index, Ibovespa, dropped approximately 15% following the unexpected presidential election victory of Luiz Inácio Lula da Silva. While most Israeli investment managers focus on U.S. and European markets, two Israeli mutual funds managed by Ayalon, with advisory from Zvulun Investment House, have significant exposure to Brazil. These funds, Ayalon Zvulun Foreign Stocks and Ayalon Zvulun Foreign Stocks - Dollar Denominated, collectively manage about 365 million shekels ($100 million USD) and hold substantial portions of their assets in Brazilian equities, particularly in the banking and energy sectors.
The Ayalon Zvulun Foreign Stocks - Dollar Denominated fund, managing 162 million shekels, has about 61% of its assets in Brazilian companies, including major banks like Itaú Unibanco and Bradesco, digital banking firm Nu Holdings, oil company Petrobras, and steel producer Gerdau. The Ayalon Zvulun Foreign Stocks - Indexed fund, managing 203 million shekels, had around 42% in Brazilian stocks as of late July, alongside a leveraged ETF tracking the Brazilian market, increasing its sensitivity to local market fluctuations.
These funds are expected to experience sharp declines on Wednesday when their foreign assets are revalued, following the market crash. The Brazilian Real has also weakened by about 8% against the dollar, further pressuring Brazilian companies' dollar-denominated securities. However, the funds' holdings in American Depositary Receipts (ADRs) are already priced in dollars, reflecting exchange rate impacts.
Lula secured 51.8% of the vote in Sunday's runoff election, defeating Flávio Bolsonaro, son of former President Jair Bolsonaro. Investors had anticipated a Bolsonaro victory, which would have favored a more conservative economic policy and supported market rallies. Ayalon Mutual Funds manages the funds, with Zvulun Investment House acting as the investment advisor. Neither Ayalon nor Zvulun provided a comment.
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