To many investors from Eurasia, the Brazilian stock market seems exotic and perplexing. However, there are no myths and legends connected to it. The aim of this article is to help fight stereotypes and describe the history of the Sao Paulo stock exchange, also giving examples of trading Brazilian stocks.

History of the Brazilian stock market

The Sao Paulo stock exchange was founded on 23 August 1890. It was the first entity of this kind in the country and is nowadays the largest stock market in Latin America. It is officially called B3 S. A. – Brasil, Bolsa, Balcão, or just B3 S.A. In 2003, B3 S. A. merged with the commodity market and is currently considered universal, giving access to almost all financial instruments.

Active development began in 1965 when the Ministry of Finance of Brazil revoked the federal status of the exchange, preserving only the regulating functions, such as the Comissão de Valores Mobiliários (CVM), which is the Securities and Exchange Commission of Brazil.

In 1997, B3 S. A. got upgraded, giving access to trading not only to market whales but also smaller investors via the Mega Bolsa system of electronic trades. It set up branch offices in London, Rio de Janeiro, and Shanghai. Then the exchange kept attracting investors who wanted to become co-owners of the business by buying its stocks, trading freely.

Listing in B3 S. A.

To offer its shares to the Brazilian stock market, a company must comply with the following conditions:

  1. No less than 25% of the stocks must be in free circulation. An exclusion can be made: if daily liquidity is high, the percentage of freely circulating shares may be decreased to 15%.
  2. There must be no less than two independent directors on the board of directors or no less than 20%.
  3. The issuer must be approved by CVM, the state regulator.

On the Brazilian stock market, a wide range of securities is traded, including:

  1. Shares
  2. Bonds
  3. Options
  4. Commodity and currency futures
  5. ETFs
  6. Indices
  7. Warrants
  8. Treasury bills (a 10-year futures contract for US treasury bonds)

The most liquid stocks on B3 S. A.

The following shares constitute the "blue chips" of the Sao Paulo exchange:

  1. PETROBRAS is the largest oil company in Brazil
  2. Itau Unibanco Banco Holding SA is one of the largest banks in Brazil
  3. Banco Santander Brasil SA Unit is another well-known representative of the banking sector
  4. Banco Bradesco SA is the country's third-largest bank
  5. Amber SA is the largest beer brewery in Brazil
  6. Vale S.A. is a mining company
  7. Banco do Brasil is the oldest and largest bank in the country
  8. Itausa Investimentos Itau SA is a multinational holding company that contains Itau Unibanco, a pulp-and-paper manufacturer, and some chemical plants among others
  9. Telefônica Brasil is a telecommunication company
  10. Klabin produces paper and package
  11. B3 S. A. SA Brasil Bolsa Balcao is the shares of the exchange itself

All the above shares (except the last two positions) are now available on RoboMarkets R StocksTrader web platform. Check out the full trading conditions at the end of this article.

How to trade Brazilian stock

There are no major differences between the Sao Paulo exchange and, say, the New York exchange. Hence, there are no trading strategies or analysis methods particular to this exchange: a trader can use the whole range of techniques practiced in the US market.

However, there are several peculiarities that should be taken into consideration:

  1. The currency of the exchange is the Brazilian Real (BRL). The exchange rate against the USD in July 2021 was about 0.19 BRL for 1 USD.
  2. Trading time is 16:10 — 22:55 (UTC +3).

Now let's take a look at some stocks from B3 S.A. and the analysis of their price in July 2021.

Ambev SA (BVMF: ABEV3)

This is one of the largest beer companies in Brazil, founded in 1999. It sells its products in 14 countries in North and South America.

Revisiting that day – 7 July 2021 – and quoting the situation on D1:

After a pullback of the upper border of the ascending channel, the stock price keeps recuperating. The horizontal support level has been tested, which might signal further growth. As long as the price remains above the 200-days Moving Average, the ascending dynamics are likely to continue to the target goal at the nearest resistance level, which is also the local high.

Judging by all the facts, we conclude that after a minor pullback and a test of the resistance level, there will be a breakaway and the price will continue the uptrend.

Ambev SA (ABEV3:BVMF) stock for 7 July 2021*
Ambev SA (ABEV3:BVMF) stock for 7 July 2021*

JBS S.A. (BVMF: JBSS3)

This is one of the largest companies in the food industry that processes animal proteins.

Currently, its shares are falling to the lower border of the ascending channel. However, the July 2021 prices are still above the 200-days Moving Average, so when this is reached, they are quite likely to bounce off it.

The aim of the pullback is 27.50. After a test of the support level and a bounce, the uptrend is likely to continue. The aim of further growth is the resistance level of 31.80.

JBS S. A. (JBSS3.BVMF) shares on 7 July 2021*
JBS S. A. (JBSS3.BVMF) shares on 7 July 2021*

Itaúsa SA (BVMF: ITSA4)

This holding has subsidiaries that provide banking services, work in production, recycling, transportation of energy carriers, etc.

On the current D1, the prices keep declining inside the ascending channel. They have two support levels: the horizontal one near 10.35 and the 200-days MA. A breakaway here will signal further falling. In this case, the aim will lie at the next support level of 9.90

Itaúsa SA (ITSA4.BVMF) shares on 7 July 2021*
Itaúsa SA (ITSA4.BVMF) shares on 7 July 2021*

Conclusion

Shares traded on the Brazilian stock market will definitely have their fans among traders and investors. In the future, they can become as profitable as the shares of market leaders, and their relatively low prices can attract beginner investors and stock market speculators.

To trade Brazilian stocks, you need a broker account, enough knowledge of the market, trading strategies, and analysis, and be in the course of the peculiarities of Brazilian stock exchange.

Conditions of trading Brazilian stocks on R StocksTrader

  • Number: 30
  • Platform: R StocksTrader (WebiOSAndroid)
  • Spread: from 0 pips
  • Leverage: up to 1:5
  • Commission fee: 0.1% per share (10 BRL minimum)

* - Past performance does not predict future returns.


Material is prepared by

A trader since 2009, Max specialises in stock and currency markets. He is also a regular speaker in educational events about financial markets and investing.