As the leading operator of financial exchanges in Brazil, BM&FBOVESPA SA (BSP:BVMF3, Financial) should benefit from the long-term development of the Brazilian capital markets, in our view. While the macroeconomic environment in Brazil remains weak, expectations of a recovery have driven solid gains in BM&FBOVESPA along with the broader Brazilian equity market and currency. Shares have also benefited from the company’s recent acquisition of Cetip, a provider of registration, custody, and settlement of fixed income securities, derivatives, and auto liens. The company has high barriers to entry due to its scale advantages, capital resources, and vertical integration into post-trading activities. We think BM&FBOVESPA will benefit from continued growth in trading volumes, bolstered by an improved competitive position from its acquisition of Cetip.
From Baron Insights: Banking on Growth in International Financials.
