Shares of Petrobras (NYSE:PBR), the Brazilian state oil company, fell after President Jair Bolsonaro lost his reelection battle to predecessor Luiz Inácio Lula da Silva, who is known as Lula. PBR stock dropped as much as 8% overnight on the news.
With 100% of votes counted, of the roughly 120 million votes cast against 49.1% for the incumbent. Lula campaigned partly on environmental issues, emphasizing renewable energy and supporting protection of the Amazon rain forest.
The Bigger Issue
Beyond differences on policy, what may hurt all Brazilian stocks is the fact that Bolsonaro the result. His son has made unsubstantiated claims of .
Before the election, PBR stock had reclaimed its rising nearly 13% in four weeks after it released positive earnings estimates. The stock also of voting, as Bolsonaro did better than expected and forced a runoff. Before the election, one hedge fund predicted PBR stock in a best-case scenario.
Petrobras is mostly owned by the government, and Bolsonaro with one of his own officials this year. But he hinted in recent months
the company if he is reelected, which markets took as another bullish sign.
Petrobras was the subject of a corruption investigation called “” in the 2010s that implicated Bolsonaro’s predecessor , an ally of Lula. Lula’s program has suggested a windfall profits tax against Petrobras .
But the company recently discovered , possibly an extension of fields found by Exxon (NYSE:XOM) . If Petrobras can exploit those fields, it would be bullish for the company and assure global oil price stability.
What Happens Next for PBR Stock?
If Bolsonaro accepts defeat, and if Lula can keep corruption at bay, Petrobras stock is likely to recover.
However, both are uncertain, and markets hate uncertainty.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
