After months of negotiations, Brazilian telecommunication titan Tele Norte Leste Participacoes S.A. (TNE) has reached an agreement to acquire rival Brasil Telecom (BRP), two newspapers reported Friday.
The reported $4.6 billion deal would consolidate a rapidly growing industry in the emerging South American economy, giving Oi - also called Tele Norte Leste Participacoes SA and already Brazil’s biggest phone carrier - a 70% share of Brazil’s fixed-line market.
And on Feb. 20, Brazil displaced China to become the world’s biggest emerging market, according to a key index - Morgan Stanley Capital International Global Emerging Markets (MSCI GEM).
That shift will likely attract billions in new money to Brazilian stocks, especially from money managers who benchmark their portfolios against the MSCI GEM index.
The bottom line: Expect money to flood Brazilian shares, says Keith Fitz-Gerald, Investment Director for Money Morning.
"Anytime a country moves to the top of that index there’s a strong re-indexing effect," Fitz-Gerald said. "And that will lead to billions of dollars of institutional money being shifted as those professional investors rebalance their portfolios. They’re going to move substantial amounts of money into Brazilian stocks."[1]
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