MSCI Move May Trigger $4.7 Billion Of Inflows Into U.S.-Listed Stocks By Brazil Firms

(Bloomberg) -- Shares of Brazilian companies listed on foreign exchanges could see inflows worth billions of dollars due to an MSCI Inc. decision announced late Monday.

The index provider said foreign listings would become eligible for the MSCI Brazil Indexes starting in August. Such a move could result in $4.7 billion of inflows for Nu Holdings Ltd., StoneCo, XP Inc. and PagSeguro Digital Ltd., Morgan Stanley strategists led by Nikolaj Lippmann wrote in a note to clients. The four companies went public in the US in the past six years.

The decision “is a game changer for Brazil equity markets” and the nation’s companies listed in the US will likely enjoy both access to the American market and passive inflows from benchmarked assets, the strategists said. They said Nubank, StoneCo, XP and PagSeguro “have high chances of inclusion.”

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Various Brazilian companies in recent years chose the US route for their public offerings amid expectations they would be able to tap deep-pocketed investors and achieve higher valuations.

Some smaller firms, however, ended up with lower trading volumes than expected and a lack of analyst coverage. Brazilian education company Vitru even decided to delist in the US.

Shares of Nubank gained as much as 2% before trading little changed in New York Tuesday. It bucked the otherwise negative session for US stocks, which were dragged down as traders pared back their rate-cut expectations after a faster-than-expected inflation reading.

(Updates with stock move in sixth paragraph.)

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