Brazil's Stock Market Among World's Best in 2016 Despite Struggling Economy

Brazil is a puzzle for economists this year. Even though it has a terrible economy, the stock market of the country is one of the world's best this year.

Even though the health of the stock market is perceived as one of the leading indicators of how the country's economy is doing, Brazil deviates from this notion. The stock market and the economy are going in different directions. Stocks in the struggling economy are up this year.

The shares of Vale SA, the world's largest iron ore miner, were at their highest in about four months. The prices of Steelmakers Usinas Siderurgicas de Minas Gerais SA and Companhia Siderurgica Nacional stocks also rose.

Fighting Corruption Boosts Stock Market

Many are attributing the healthier stock market amid a terrible economy to the country's rising hope that the corruption that wracked the country recently can be resolved.

The country's economy took a beating after a corruption scandal surfaced at the government-run oil company, Petrobas. The scandal intensified when the Brazilian police detained ex-President Luiz Inacio Lula da Silva for his alleged role in the scandal. The former president was widely popular during his time and served as an icon for the nation's less fortunate classes. 

Even though the President was let go after a few hours of questioning, this sparked hope that the scandal was going to be resolved soon. Right after the police announced that they had arrested the former president, stock market prices shot up. As previously reported by Latin One, the Brazilian ex-president called out investigators for being arrogant. 

Investors also believed that this is a move towards the direction they want. Most want current president Dilma Rousseff impeached and replaced with one who has more market-friendly policies. Because Rousseff was Lula's preference as a successor, Lula's arrest sparked hope that Rousseff will be removed eventually from her position as well. 

Oil Markets are Rebounding

With oil prices now up since hitting rock bottom in mid-February, the prices of other commodes are now up as well. Examples of goods that saw their prices increased are iron ore and soybean. This led to stock market price increases. 

According to experts, it is still unclear whether the rebound of the oil markets is sustainable. However, as of now, the oil markets have already bounced back more than 40 percent since hitting a low $26.21 in early February. At the time, analysts and forecasters already said that oil prices could even reach only $20 a barrel.

It remains to be seen if stock market prices are going to increase further, given they are rising based on speculations and uncertain trends. 

Here is a video explaining what the impeachment of the current president would mean: