BUENOS AIRES/SAO PAULO/MEXICO CITY: Brazilian stocks will reach pre-pandemic levels by the middle of 2021, but concern about the impact of a second wave of coronavirus cases could limit the recovery, a Reuters poll showed. The benchmark Bovespa stock index is forecast to cover part of that road by the end of 2020. It has already risen 70% from lows inflicted by Covid-19, which has caused almost 170,000 deaths in Brazil.

However, Latin America’s largest equity market is seen pausing in the second half of 2021 due to fears about the potential damage caused by any relapse in the second worst-hit country after the United States.

“Rising uncertainty and a possible repeat of lockdowns in Europe and the Americas bring a heavier scenario that, if materialized, would pull the brakes on the Ibovespa,” Alexandre Jung, head equity at Vero Investimentos, said.

The index is predicted to close this year at 108,000 points, 0.6% above its value on Monday, and then move up to 117,500 points - near its record set in January - by mid-2021, median estimates of 10 strategists polled Nov. 12-23 showed.

But it is expected to trade not too far from that level at end-2021, with investors on alert for any improvement in the precarious state of Brazil’s public accounts and the next steps from President Jair Bolsonaro’s government.

“Investors will only look again at increasing their exposure in the country’s risk assets after important political and economic matters are defined in 2021, which will require much effort,” Jung said.

Mexican equities are forecast to return to pre-coronavirus levels at the end of year, advancing 11% to 46,000 points from an expected close of 41,500 in the final trading day of 2020, the survey showed.

While distant from its record in July 2017 of 51,713.28 points, next year’s forecast was much more bullish than the end value estimated for the S&P/BMV IPC index in the last poll taken three months ago, at 42,600 points.

This is explained by speculation that Mexico’s central bank will keep its dovish stance to ensure an economic recovery that is lacking the kind of massive spending stimulus implemented by neighbours.