(BATS:GGAL+BATS:BMA+BATS:SUPV+BATS:BBAR)/(BATS:NU+BATS:ITUB+BATSThe ratio between Argentine banks (numerator) and Brazilian banks (denominator) has reached historic highs and continues to rise. Banks like Galicia and Supervielle have increased their value tenfold since their all-time lows ( NASDAQ:GGAL , NYSE:SUPV ). Meanwhile, Banco Macro and Banco Francés ( NYSE:BMA , NYSE:BBAR ) have grown eightfold from their lowest points.
In contrast, Brazilian banks remain at minimum levels, with prices close to those recorded during the Corona-crash. For instance, NYSE:BBD (Banco do Bradesco) is currently trading at 2.38 per ADR, very near the 2.20 low reached during the pandemic. This scenario reflects four years of sideways movement—a period of accumulation similar to what Argentina experienced between August 2019 and October 2023. Precisely four years. We believe this cycle of accumulation in Brazil may have come to an end.
For those considering investing in Brazil through the EWZ index, it’s important to note its high weighting in companies like the mining giant NYSE:VALE and Petrobras ( NYSE:PBR ), which are heavily tied to commodities. While these companies are highly representative of Brazil’s market, they are not at their lows and show a sideways-to-downward trend from both technical and fundamental perspectives.
On the other hand, we see greater value in assets that are at their lows, such as Banco do Bradesco ( NYSE:BBD ), steel producer Gerdau ( NYSE:GGB ), and steelmaker NYSE:SID , among others. Based on both graphical analysis and the broader context, these companies appear to have the highest potential for future growth and the best revaluation percentages.
Additionally, the macroeconomic context highlights the differences between the two countries. The Brazilian real is on a devaluation trend, while the Argentine peso has appreciated. This translates into contrasting stock markets: when Argentina had a USD/ARS exchange rate of 1,500, the country was booming with tourists, costs were low, and the stock market reflected this affordability. Today, with Argentina being an expensive country (even more expensive than the U.S.), its stock market is also costly.
In contrast, Brazil, with a USD/BRL exchange rate of 5.70, shows a cheap stock market aligned with its current economic conditions. However, we emphasize the importance of acting cautiously when investing, carefully evaluating each stock's situation.
