Ibovespa falls 13.88% after electoral turnaround and the electricity sector enters investors’ radar

Monday's trading session (26/10) entered the recent memory of the Brazilian market. According to Times Brasil, the Ibovespa fell 13.88% and closed at 176,608 points, while the dollar rose 8.25%, to R$5.40. The drop was intense enough to trigger the circuit breaker, a mechanism that automatically interrupts business, for the first time since March 2020.

The size of the movement appears when compared to the previous Friday (23/10), when the index had closed above 205 thousand points.

The scenario that the market was betting on was that of a change of government before the investigation. The expectation, however, was not confirmed: on Sunday (10/25), the result brought the first turnaround between rounds since 1989, according to Times Brasil.

In an analysis published by Times Brasil and signed by Sérgio Leverdi, CEO of LAWINFRA, the focus is on the effects of the electoral result on the electricity sector and the concessions market. The title of the publication treats the episode as the side effects of re-election.

What is at stake is the regulatory predictability of a sector that operates with long-term contracts. When the political scenario changes abruptly, the pricing of concessions and companies in the sector tends to become more sensitive to the decisions that lie ahead.

What changes for the investor

For those who invest and operate, the message is that the stock exchange and exchange rate reacted in a single trading session to a turnaround that the market did not project. It is worth monitoring in the coming sessions how the dollar and securities linked to concessions and the electricity sector behave, especially as the definitions of the new scenario take shape. The investigation does not provide data on these developments, and therefore the concrete effect on each asset remains unclear.

Automatically translated from Portuguese.