Nu Holdings Ltd. (NYSE:NU) shares are sliding Monday along with other U.S.-listed Brazil stocks after Luiz Inácio Lula da Silva beat Flávio Bolsonaro in Sunday’s presidential runoff.
- Nu Holdings stock is taking a hit today. What’s weighing on NU shares?
Brazilian Stocks Plunge After Lula Wins Runoff
Brazilian President Luiz Inácio Lula da Silva won Sunday’s presidential runoff, beating Flávio Bolsonaro 51.8% to 48.2%. Three weeks earlier, Bolsonaro had finished first in the opening round by 47.0% to 45.2%.
Brazilian stocks are plunging in response. The iShares MSCI Brazil ETF (NYSE:EWZ), a fund that tracks Brazilian equities, traded at roughly $31.83 in premarket, down around 25.3% from Friday’s close. A loss that size would be the largest one-day decline since the fund began trading in July 2000.
Why Brazilian Stocks Are Falling
Investors had bought Brazil as Bolsonaro gained ground. EWZ jumped 12.5% on Oct. 5, its best day since March 2020, and took in $4.09 billion of net inflows from Oct. 1 to Oct. 23, close to 30% of its assets. Lula’s win reverses those bets in a single session.
Doubts about Brazil’s finances add pressure. Pantheon Macroeconomics chief Latin America economist Andrés Abadía wrote Monday that “restoring fiscal credibility will be the harder task.” Lula has little room to cut, Abadía said, because required spending keeps growing, debt payments are high and social programs carry commitments.
Congress complicates any fix. Lula depends on the Centrão, a bloc of centrist parties, to pass spending reform, because Bolsonaro’s Liberal Party holds 121 lower house seats and 28 Senate seats.
Why the Selloff Hits Nu
Nu runs a digital bank with its largest customer base in Brazil, so a sell-off in Brazilian assets reaches the company directly. Fintechs, banks and utilities are posting the steepest premarket losses.
Abadía expects the real to weaken and local yields to rise, which hits domestic companies tied to interest rates hardest. A weaker real can shrink the dollar value of earnings made in Brazil, and higher yields can raise funding costs for lenders. Both could weigh on a Brazil-focused lender like Nu.
NU Shares Are Tumbling
NU Price Action: Nu shares were down 20.58% at $12.04 at the time of publication on Monday, according to Benzinga Pro data.
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