Petrobras opens decrease as Lula wins Brazil presidential election; JPM downgrades (NYSE:PBR)

Petrobras (NYSE:PBR) -3.7% in early Monday buying and selling after leftist Luiz Inacio Lula da Silva gained Brazil’s presidential election, narrowly defeating incumbent Jair Bolsonaro, pledging a return to state-driven financial progress.

Lula’s election extends a wave of current leftist victories in Latin America, together with Chile, Colombia and Argentina; he beforehand served as Brazil’s president throughout 2003-10.

Downgrading Petrobras (PBR) to Impartial from Outperform, J.P. Morgan famous the brand new administration has brazenly criticized how the corporate has been run and mentioned doubtless modifications on the firm, maybe on capital allocation and pricing coverage for fuels offered domestically.

The plan from Lula’s PT get together requires Petrobras (PBR) to spend money on refineries in an effort to permit Brazil to rely much less on imported gas, and requires implementing a mechanism that will create a “Brazilian worth” for fuels, JPM stated.

Whereas many investor considerations already are priced in Petrobras’ (PBR) shares, and governance and basic public scrutiny will play an essential function on the firm, the inventory worth “won’t totally mirror fundamentals till buyers have readability on precisely what’s going to change on the firm,” which ought to take at the very least six months, JPM stated.

The political danger is just too excessive to carry Petrobras (PBR) shares, Ricardo Fernandez writes in an evaluation posted just lately on Looking for Alpha.