What Is the São Paulo Stock Exchange?
The São Paulo Stock Exchange is a stock and over-the-counter market based in Sao Paulo, Brazil.
Founded in 1890 as Bolsa de Valores de São Paulo (BOVESPA), it is now part of B3 SA or Brasil, Bolsa, Balcão. B3 was formed following the 2008 merger of the exchange with the Brazilian Mercantile & Futures Exchange or Bolsa de Mercadorias e Futuros.
The exchange is among the largest in the Americas with a market capitalization of $978 billion and 351 listed companies as of February 2021.
- The São Paulo Stock Exchange is one of the largest exchanges in the Americas.
- Also known as the BOVESPA, the exchange is now part of the B3 or Brasil, Bolsa, Balcão.
- The BOVESPA Index, commonly known as the IBOVESPA, is the main performance indicator for this market. Its symbol is BVSP.
- The exchange lists the stocks of 351 companies.
- Over-the-counter stocks and commodities also are traded on the exchange.
Understanding the São Paulo Stock Exchange
The São Paulo Exchange was founded in 1890 in São Paulo, Brazil, one of the country's largest and most cosmopolitan cities. It was commonly referred to as BOVESPA, an acronym for its Brazilian name, Bolsa de Valores de São Paulo.
It is one of five exchanges in the country and among the largest in the Americas. It is one of Brazil's largest companies in market value, holding a prominent global position in the stock market industry.
The São Paulo Exchange merged with the Brazil Mercantile and Futures Exchange in 2008 to create the BM&F Bovespa Exchange. It is now known as B3 or Brasil, Bolsa, Balcão, and trades under ticker symbol B3SA3 on the Novo Mercado premium listing segment. The company has a strategic partnership with the CME Group, which allows the cross-listing of different financial products.
A total of 351 companies are listed on the exchange, only four of which are foreign names. The value of share trading for equities on the exchange was $129 billion as of February 2021.
Pre-market trading takes place between 9:45 a.m. and 10:00 a.m. local time, Standard trading takes place between 10:00 a.m. and ends at 5:00 p.m. or 5:15 p.m., depending on the security.
Requirements for the São Paulo Stock Exchange
The São Paulo exchange lists commodities and futures as well as stocks. Over-the-counter transactions also are permitted. Companies are required to follow the corporate governance rules of the segment in which they trade.
Stocks listed on the exchange are represented by ticker symbols with five characters. The first four characters are capital letters that denote the name of the issuer. The last character indicates the class of the stock:
- 3 represents an ordinary stock
- 4 is a preferred stock
- 5 indicates preferred class A shares
- 6 indicates preferred class B shares
- 7 indicates preferred class C stock
- 8 indicates preferred class D stock
Stock prices are quoted in Brazilian reals (BRL) to two decimal places and settle in T+2 days.
Foreign companies may list their shares on the exchange using sponsored Brazilian Depositary Receipts (BDRs).
Interested in investing in Brazil? Consider a mutual fund, exchange-traded fund, or American depositary receipt.
The BOVESPA Index, commonly known as IBOVESPA, is the primary performance indicator of stocks traded on the exchange. Since its creation in 1968, the index has been a benchmark for investors around the world who are interested in Brazilian equities.
A five-year charge of the IBOVESPA shows steady improvement in its performance, from 65,403 BRL on April 1, 2017, to 121,570 BRL on April 1, 2022.
A total of 82 companies were included in the index as of April 19, 2021. The IBOVESPA is weighted on a market value of free float and is reconstituted every quarter. It accounts for about 80% of the trades and the financial volume of the capital markets.
Commitment to Sustainability
B3 is committed to sustainability. It was the world's first stock exchange to adhere to the Global Compact in 2004.
The company is also a member of the U.N. Global Compact Brazilian Committee. Since 2017, an exchange representative has acted as the vice president of the Global Compact’s Brazilian Committee.
Global Compact is a United Nations initiative that aims to mobilize the international business community to adopt business practices that reflect internationally accepted values in regards to human rights, labor relations, the environment, and corruption prevention.
The Global Compact stipulates that companies report their progress annually, as regards the Ten Principles of the Global Compact, through a Communication on Progress (CoP) on the Global Compact’s international website.
What Is the IBOVESPA Composition?
The IBOVESPA includes such internationally-known names as Petrobras Brasil and Banco de Brasil. About 84 of the 351 companies that list on the Sao Paulo exchange are tracked in the index.
What Is the IBOVESPA P/E Ratio?
The three-year average P/E ratio for the BOVESPA Index was 14.2x for the period ending April 1, 2022.
The median P/E ratio on that date was 10.2x.
How Can I Invest in the BOVESPA Index?
Brazil is Latin America's largest economy and is considered an emerging market. As such, it has attracted the attention of international investors looking to diversify.
A number of mutual funds and exchange-traded funds are focused on Brazilian stocks. Among them is iShares Ibovespa Index Fund (BOVA11.SA), which tracks the São Paulo index.
U.S. investors can buy the dollar-denominated American Depositary Receipts (ADRs) of more than 80 Brazilian firms that are traded on U.S. exchanges or over-the-counter markets.
Foreigners interested in Brazilian investments can choose among at least eight exchange-traded funds that focus on the nation's companies.
The Bottom Line
Investors interested in any emerging market would do well to closely follow the nation's social and economic progress. Brazil suffered a recession in 2020. Its economy contracted by more than 4%, due mostly to the effects of the COVID-19 pandemic. This was followed by a recovery in 2021. Nevertheless, the nation's fiscal health is considered poor.