Commodities surge limits falling dollar influence on equities, analysts say

The devaluation of dollar against the real already exceeds 15% this year. This movement affects from those who intend to travel abroad to the definition of prices in the economy. At shares on the stock exchange do not escape these effects.

Normally, in scenarios like this, companies that receive earnings in US currency are more exposed, since the lower the dollar value, the less money they earn when converting to the real. The main examples of this group are in the commodities. Currently, however, with the values ​​of these inputs pressured abroad, the effect of the fall in the dollar has been milder.

For Pedro Serra, head of research at Ativa Investimentos, it is necessary to make a “double account”, considering exchange rates and commodity prices, to understand the performance that this type of company has had on the stock market. “One can neutralize or compensate for the other, but it usually has a great grip on dollar fluctuations, especially the deeper ones”.

Ricardo Campos, CEO of Reach Capital, says that the analysis of the dollar’s influence on stocks ends up being more difficult due to the combination of causes for a given fall or rise. There is the impact of currency, but also measures such as interest rate, commodity price, performance of the country’s economy, foreign investments and the political-fiscal scenario, in addition to issues of each company.

For him, this is what now explains a scenario opposite to what was expected, in which the effects of the fall in the dollar, positive or negative, have been limited on the stock market due to the consequences of the war in ukraine.

traditional influence

Considering the group of commodities stocks, the segment that usually best reflects the variation of the currency is pulp and paper, with the klabin and the suzano as the largest representatives in the Brazilian stock market. As they are highly dependent on exports, they end up being the ones that most reflect variations in the dollar.

For Serra, the stock market sector that usually gains the most from the fall in the US currency is the air, since planes consume large amounts of kerosene, quoted in dollars. In addition, the appreciated real encourages people to travel more abroad. With this, tourism actions are also usually benefited.

In addition to airlines, Serra believes that any company that it matters a large part of its inputs, and therefore purchases in dollars, benefit from the fall in the currency due to cost reductions, as in the case of the laboratory sectors and some drug manufacturers.

Among these importing sectors, Campos, from Reach Capital, also mentions telecommunications, supermarkets and beverage companies. Already banksthe education sector and energy companies are usually little affected by currency fluctuations.

“In the case of capital goods companies, it depends on whether they export more or import more. Weg and Iochpe-Maxion, for example, have most of their production exported, so it’s bad for them,” he says.

Performance in 2022

Serra, from Ativa, also sees a limitation in the effects of the dollar with the current scenario. For him, “the rise in commodities spoke louder than the fall in the dollar. THE Petroleum went from US$ 90 to US$ 125, it is around US$ 105, it is a very relevant increase, and it happened with other commodities, such as agricultural”.

“Even if the dollar falls, the commodity rose much more, so it ends up being positive [para as empresas do setor]”, it says.

And this also leads to a reversal for companies that could benefit from the fall in the dollar. This is the case for airlines, as the fall in the currency does not compensate for the rise in fuel costs.

In his view, two segments were exceptions to this, and which actually followed the traditional trend of behavior, is paper, with Suzano and Klabin benefiting from the rise in commodities but generally following the dollar, and protein , more specifically those with assets abroad, in the case of JBS.

According to Campos, “sometimes the company could benefit only from the dollar, but then other issues come in, such as the increase in commodity prices now with the war”.

He cites as an example the two largest companies on the stock exchange, OK The Petrobraswhich appreciated in 2022 even with the falling dollar, due to high oil and iron ore prices.

Jennie Li, Equity Strategist at XP, assesses that “since last year, exporters were benefiting from the rise in commodities and the dollar, now it is more unfavorable for the exchange rate”, but the performances have still been positive.

“So far, stocks linked to energy commodities are the big winners, whether or not it’s a current energy crisis,” he says.

These are the companies that have benefited the most from one of the largest foreign flows to Brazil in recent years.

“This inflow of foreign flows is well targeted to commodities and banks, because there is a favorable global scenario and banks are more protected from higher interest rates. The more domestic ones are still more abandoned, they are much further back,” she says.

For her, in addition to thinking about the effects of the dollar’s fall on Brazilian stocks, the current scenario opens an interesting window for those looking to diversify investments with assets abroad, something she considers to be important.

“The falling dollar opens up the opportunity to start thinking about investing outside Brazil, it becomes more reasonable. The idea is to gradually increase international exposure, diversify risks and have a strong currency in a global crisis. It is a good time to diversify”, he says.