GIC's investment in Linx shows confidence in Brazil's economy

SINGAPORE - GIC, Singapore's sovereign wealth fund, is buying stakes in Brazilian companies in a sign of confidence the world's second-largest emerging market will overcome slower growth.

GIC bought 5.02 per cent of communications technology provider Linx SA, according to a March 10 filing by Linx. This month, it increased its stake in Sao Paulo-based food processor BRF SA and in October agreed to invest in water and sewage treatment company Aegea Saneamento e Participacoes SA.

The investments by GIC, which manages more than US$100 billion (S$126.6 billion) of assets, in Latin America's largest economy come as the government of Brazilian President Dilma Rousseff is combating inflation with interest rate increases, while sustaining growth.

Growth in gross domestic product is expected to accelerate to 2.5 per cent in 2015 from 1.9 per cent this year, according to data compiled by Bloomberg. That's more than double the rate in 2012.

"Being a long-term investor, GIC is not scared away by short-term volatility," said Christopher Balding, an associate professor at Peking University HSBC School of Business in Shenzhen in southern China, who has researched sovereign wealth funds.

"Brazil is definitely one of the economies with the best middle- or long-term outlook in Latin America." GIC declined to comment on its Brazil investments in an e-mailed response to Bloomberg News queries.

GIC is planning to open an office in Sao Paulo, a person familiar with the matter said in June. That would add to its network of eight overseas including in London, Mumbai, Shanghai, Tokyo and New York.

Shares in Sao Paulo-based Linx have gained 72 per cent since the company's initial public offering in February last year. They closed at 46.39 reais yesterday, valuing GIC's stake at 108 million reais (S$58.3 million).

GIC increased its stake in BRF to 4.4 per cent from 3.8 per cent this month, according to a March 4 filing with the US Securities and Exchange Commission. That would value its stake in BRF at about 1.7 billion reais.

The Singapore state-owned fund owns a 4 per cent stake in Brazil's biggest clearinghouse Cetip SA-Mercados Organizados, valued at about 260 million reais, according to data compiled by Bloomberg.

It holds a 5.9 per cent stake in retail landlord and developer Aliansce Shopping Centers SA and a 5 per cent stake in property developer Direcional Engenharia SA.