Transcript Presentation Title

Market Update
ASLF 2016
Juliana Agostino
Brazil Direct Custody and Clearing Head
Capital Market
Political and Economic Environment
Challenging political and economic environment
Inflation above target in 2015, still a concern in 2016
Strong FX devaluation
Recession in 2015 and 2016; potentially resuming growth in 2017
Reimplementation of fiscal discipline must be a priority
Record low popularity levels
Political environment impacting Economy
Ms. Rousseff’s impeachment formally in motion
Rousseff’s Support in the Lower Chamber
Popularity of Different Presidents
100
12
0
36
24
48
months after inauguration
80
140
120
60
Strong Support
of Government
(78 seats)
General or
Partial Support of
Government (218
seats)
100
40
67
62
54
60
0
-20
40
-40
20
-60
37
11
5
-80
Collor
Lula 2
12
FHC 1
Dilma I
24
FHC 2
Dilma II
36
Lula 1
48
Source: Datafolha and Citi Research
34
21
0
0
116
81
80
20
Opposition or
Independent
(217 seats)
Source: Citi Research
16
9
Capital Market
140
45
Confidence Indicators
130
% YoY
Credit Growth
40
35
120
30
110
25
100
20
Sep-15
Apr-15
Nov-14
Jun-14
Jan-14
Aug-13
Fixed income: Market cap vs foreign/local investor distribution
(Gov Bonds)
100%
8%
10%
18,000
80%
8,000
Mar-13
(B-S in BRL Billion)
13,000
Non-Earmarked
Source: Brazilian Central Bank and Citi Research
Equity Market: Net financial movement of foreign investors
23,000
Oct-12
Source: FGV and Citi Research
Earmarked
May-12
Total
Dec-11
Service Sector
Jul-11
Sep-15
May-15
Jan-15
Sep-14
May-14
Consumer
Jan-14
Sep-13
May-13
Jan-13
Sep-12
May-12
Jan-12
Sep-11
May-11
Jan-11
Sep-10
May-10
Jan-10
Sep-09
May-09
Jan-09
Industrial Sector
Feb-11
0
Sep-10
60
Apr-10
5
Nov-09
70
Jun-09
10
Jan-09
80
Aug-08
15
Mar-08
90
2,020
17%
20%
19%
2,078
1,950
1,607
60%
3,000
2,408
14%
2500
2000
1500
1,334
40%
(2,000)
1000
964
(7,000)
20%
(12,000)
(17,000)
753
863
852
833
625
0%
(22,000)
0
2007
(27,000)
2010
Local
Source: BM&FBOVESPA
500
2012
Foreign Investors
2013
2014
USD Bn
Source: Brazilian National Treasury and ANBIMA
Nov 2015
BRL Bn
Recent Market Developments
• Phase I completed;
• Phase II, which will migrate the equities and corporate bonds clearinghouse to the new platform is entering in
test phase in February 2016, and is expected to be launched in Q4 2016.
Post Trade
Integration
Market
Infrastructure
regulation
Increase of safety
and improvement of
practices in Brazilian
market
• New regulation ruling the activities of depositories, custodians and registrar agents,
increasing investor protection by defining clear responsibilities for each market participant.
New regulation
for foreign
investment in
Portfolio
• Resolution 4,373 replaces resolution 2,689 and consolidates foreign investment
rules;
• CVM 560/15 covers the re- registration of foreign investors, transactions
executed out of the organized market and transfers between non-resident
investors;
• Soft copies of the PAF are now allowed, simplifying the procedure and reducing
the time required for account opening.
Account opening
process for nonresident
• Automated process for issuing a Tax ID for non-resident individuals (CPF) via CVM;
individuals
• Account opening procedure for non-resident individuals improved by reducing the
time to obtain such number from months to a few days.
New Tax
Regulations
Citi is a key member of
the Brazilian banking
community, with a lead
role in the main market
organizations, such as
Custody sub-commission
under ANBIMA and
BM&FBOVESPA Post
Trade Committee, and
has led various market
initiatives within the
main market
committees and with
regulators that has
benefited our clients.
Service update
Operational
Enhancements
• CTP restructuring by reorganization of the team into Processing and Client Services in order to improve the quality of services;
• Implementation of STARS tool for CTP to better track and monitor clients’ demands;
• Standard templates for FX instructions and to set up standing instructions for RVP and DVP transactions.
Improvements
on public offers
processing
Recently
implemented
developments
• Partnership with Citi Brokerage House for processing public offers;
• Nine offers processed through Citigroup Global Markets (CGM) in 2015.
More integrated
Securities
Lending solution
• Also in a partnership with CGM, securities lending solutions were developed successfully;
• In part due to our partnership, CGM moved up on 2015 on the lending brokers ranking for the Brazilian market,
becoming Top Five.
• Proxy voting: new development delivered, in which Citi discloses the list of candidates appointed by the company on
Asset Services
Enhancements
the proxy voting notification;
• Corporate actions: improved tracking and communication with clients on complex offers
Billing
Enhancement
• Consolidation of invoice data across multiple markets in one single report;
• Summary or detailed consolidated invoice data reporting available upon clients’ request.
Forthcoming Initiatives
• The second phase of BM&FBOVESPA’s project, which will migrate the equities and corporate bonds clearinghouse to the new platform, is
Phase II of the
expected to be launched in Q4 2016, with test phase starting in February 2016
Post Trade
Integration Project • Reduced amounts of collateral calls, given that the risk process will calculate the net exposure taking into account positions in both markets
Fixed Income tax
reporting
FX Enhancements
“Worthless”
securities review
Remote Voting
• Citi Brazil is working on enhanced tax reporting for government bonds on maturity and income payments.
• More detailed information on tax calculation for income events related to government bonds.
• Citi Desk is working to improve the FX booking processing, including Ad Hoc requests automation based on the trades messaging (field
11A), and the booking confirmation through MT300 messages.
• More streamlined process for booking and better reporting on FX
• Citi is reviewing an alternative to treat securities from bankrupt companies
• Allow old inactive accounts to be closed
• Details on the following slide
Country Hot Topic
Remote Voting
Facilitation of the voting process for AGMs and some EGMs by allowing investors to vote remotely, eliminating the need for physical attendance.
Simplification of the voting process and improvement of corporate governance in the Brazilian market.
Investor Options:
1
Physical attendance
2
Proxy voting: legal representative (POA) must physically attend the meeting
Remote voting: which could be delivered in one of the possibilities below:
3
Directly to the companies
4
To the local custodian, in case shares are been kept at BM&FBOVESPA
5
To the bookkeeping agent, in case shares are kept in the books of the company
IBrX Companies represent
94% of total Equities AUC,
as of Sept, 2015
Timetable Overview
2011
Law changes allowing
CVM to regulate remote
voting
Oct-14
CVM regulation regarding
Remote Voting under public
hearing
Mar-15
New CVM regulation
issued, complementing
the law
Jan-16
All companies can
offer remote voting
VOLUNTARY
Jan-17
Jan-18
Companies that make up
the Ibovespa and IBrX
must comply with remote
voting
All companies must
comply with remote
voting
MANDATORY
MANDATORY
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