Value of companies in Stock Exchange reaches GDP
Folha de S. Paulo - 06/16/2008
The growth and consolidation of the Brazilian stock market in the last few years led the value of the Bovespa listed companies to equal, for the first time ever, the size of the Brazilian GDP - something that was unthinkable in the beginning of the decade. The nearly 450 companies traded in the São Paulo Stock Market represent a value of approximately R$2.5 trillion (US$ 1.53 trillion). The GDP (Gross Domestic Product) of the country ended 2007 at R$ 2.55 trillion (US$ 1.32 trillion). In May, when Bovespa reached its history record of points, the value of the companies exceeded R$ 2.6 trillion (US$ 1.6 trillion). What was seen until 2005 was a very big difference in the size of the Stock Exchange compared to the Brazilian economy. In 1996, the market value of the companies traded in the Stock Exchange represented nearly 27% of the GDP. In 2000, this ratio had gone up, but it remained at low levels, around 37%. The faster expansion in the value of the Stock Market started being felt after 2005, period in which the stock market started its growth resumption, with the number of IPOs growing every year. Now, the Brazilian market starts being compared, in terms of size, to those of the developed countries, in which the correlation between the Stock Exchange and the GDP is often around 100%. As the numbers of capitalization in the Stock Market vary on a daily basis, with the up-and-down of the stocks, its correlation with the GDP may vary a lot during certain periods. Irrespective of that, the comparison between both indexes is normally followed by the analysts because it works as a parameter to measure the development of the market and the strength of the publicly-listed companies.