HSBC Brazil Fund Outperforms Rivals on Economic Outlook, Real

By Makiko Asai and Anna Kitanaka

Nov. 18 (Bloomberg) -- HSBC Global Asset Management’s Japan-based mutual fund investing in Brazilian stocks has beaten its biggest peers this year in the Asia-Pacific region as the stronger real boosted returns from bets on JBS SA and Duratex SA.

The 224.36 billion-yen ($2.5 billion) HSBC Brazil Open (Japan) fund has risen 170 percent in 2009, the steepest gain among 2,361 funds tracked by Bloomberg and based in the Asia- Pacific region with assets of at least $100 million.

Brazil’s Bovespa stock index has surged 80 percent this year, buoyed by the outlook for economic growth and by winning bids to host the 2014 World Cup soccer matches and 2016 Olympics. Further boosting returns at HSBC’s yen-denominated fund is the real’s 33 percent appreciation against the Japanese currency. Adjusted into yen, the Bovespa has soared 139 percent this year, the most of 89 benchmarks worldwide tracked by Bloomberg.

“Brazil’s economy is showing a strong recovery, led by domestic demand,” Pedro A B Bastos, chief executive officer of HSBC Global Asset Management in Brazil, said by e-mail. “With the 2014 World Cup and 2016 Olympic Games in Rio de Janeiro, interest in investment into Brazil has grown significantly.”

The country’s economy will expand 3.5 percent next year after a 0.7 percent contraction this year, according to forecasts published Oct. 1 by the International Monetary Fund. The real has strengthened against most currencies this year on the prospects for growth, increased commodity prices, rising stocks and an improved credit outlook.

Brazilian Stock Market

The Bovespa’s percentage gain in yen terms this year compares with increases of 25 percent for the MSCI World Index, 83 percent for the Sensitive Index in India, 78 percent for the Shanghai Composite Index in China and 130 percent for Russia’s dollar-denominated RTS Index.

JBS SA, the world’s largest beef producer and the HSBC fund’s largest holding, has climbed 95 percent this year.

“As emerging economies grow, diets change and more people eat meat, so demand is growing outside of Brazil too,” said Kenji Yamamoto, corporate director at HSBC Global Asset in Tokyo.

Duratex SA, a maker of bathroom fittings and wood panels that has gained 273 percent this year, and BR Malls Participacoes SA, Brazil’s biggest owner of shopping malls, with a 154 percent increase this year, are also among the HSBC fund’s top holdings, Bastos said.

To contact the reporter on this story: Makiko Asai in Tokyo masai@bloomberg.net; Anna Kitanaka at akitanaka@bloomberg.net.