Brazilian stocks index, Bovespa, rose nearly 2% on Friday ahead of this weekend's presidential election, whole Brazil's Real further consolidated. The MSCI's index of emerging market stocks in the region gained 1.24%. Although, the region's markets fared better than emerging markets elsewhere, they were on track to end a five-week winning streak.
In Brazil's presidential run-off on Sunday, market-preferred presidential candidate Jair Bolsonaro is expected to defeat leftist rival Fernando Haddad.
The Real logged weekly gains for a sixth straight session, its longest weekly winning streak since early last year, in a rally underpinned by hopes of much-needed economic reforms promised by the Bolsonaro.
Bolsonaro's victory is largely priced in, so the Real's gains on Monday are likely to be limited. Focus will now probably rest on Bolsonaro's appointments and the political course he is going to take, mainly as regards reforms, analysts at Commerzbank said in a note.
We see the risk that the relief following the run-off will soon be followed by disillusionment. It would seem that the financial markets are very optimistic regarding the new government's willingness to implement reforms.