My crystal ball has not been working perfectly lately. But based on information provided by clients, banks and the market in general, it is possible to make some predictions of how capital and financial markets will perform in 2013.
When it comes to equity capital markets, 2012 was very disappointing. The markets were very bullish at the beginning of the year, with some people predicting 30 or 40 companies to come to the market. The fact, though, was that only three initial public offerings (IPOs) were completed during the year, and only a few successful follow-on offerings.
The consensus is that, due to a number of positive factors, conditions this year will be better. These factors include a better outlook for the economies of the US and Europe, Brazil's largest interest rates reduction to date, and, also relevant, a large number of equity offerings that are ready to launch as soon as the window opens for Brazil. As seen from last year's predictions, it is very difficult to specify a number of offerings, but it is probably safe that we will have substantially more than three IPOs this year and a good number of subsequent offerings.
When it comes to debt, it seems that there will be two main areas of growth.
The first will be the so-called infrastructure debentures. After the uncertainties that delayed the development of the market for such securities due to both regulatory matters and the red-tape involved in getting the necessary authorisations we have already seen some new issuances by infrastructure companies. Considering there is still a huge need for new infrastructure in Brazil in several different sectors, it seems safe to predict that we will see a big increase in the number of offerings of infrastructure debentures this year.
The other line of products that will be very important in 2013 are securities linked to real estate (including LCIs, or real-estate bonds, and CRIs, or real-estate securitisation bonds) or agribusiness (LCAs, or agribusiness bonds). Banks say that the demand for such products will increase due in large part to the combination of two factors: the decrease of interest rates in Brazil, which will drive up the demand for higher yield private sector debt (as compared to government bonds) and the fact that these debt securities grant a tax benefit to their holders.
Of course, actual events have a tendency not to pay attention to our predictions and reality may take other courses due to an infinite number of variables. I hope, however, that the above predictions are in the right direction and that the capital and financial markets are able in 2013 to provide the financing needed for the Brazilian economy to achieve higher growth rates.
Antonio Felix de Araujo Cintra
© 2021 Euromoney Institutional Investor PLC. For help please see our FAQs.