The bribery scandal engulfing Brazilian President Michel Temer is a ‘big shock’ for markets still in recovery mode, but savvy investors should look to pounce as valuations plummet.
Speaking in the immediate aftermath of reports of Temer allegedly being taped discussing potential bribes, Ortiz said the newspaper reports could undo the strong work that has underpinned his short period in charge.
Temer came to power nine months ago amid revelations that then-President Dilma Rousseff was linked to wider corruption investigations known as the ‘car wash’ scandal, which led to several politicians and high-profile businessmen being arrested or forced to resign.
The announcement of Temer being recorded discussing ‘hush’ payments caused panic in the Brazilian markets and the flash sell-off led to circuit breaker measures for the Ibovespa being brought into action.
‘This is a big shock to the market that will be negative for both the equity market and currency,’ Ortiz said. ‘After the Brazilian market’s very strong run over the past 16 months, we can expect a sharp correction.
‘However, such situations that lead to an indiscriminate sell-off typically result in opportunities to buy good companies at an attractive valuation. We will be looking for such opportunities to build positions in companies with good business models, in keeping with my investment philosophy.’
Fidelity’s Anna Stupnytksa, who is global economist at the group, said there is now a likelihood Temer would be forced to leave office and create further uncertainty in the markets.