Shares of Brazil’s Casas Bahia Group (BHIA3) increased 77% during March. A significant 29,91% increase occurred in only one session, on Monday 10th March.
The price increase is a result of the highly anticipated announcement of earnings for the fourth quarter of 2024 (Q24), which will be made on March 12, 2019.
According to the local newspaper InfoMoney the ascent of the stock has attracted the attention of both investors and analysts, raising questions regarding the factors that are driving this upward trend.
A company that is on a massive rise
After the Brazilian stock market closed March 10, Casas Bahia issued a press release to the Brazilian Securities and Exchange Commission.
The company stated that the trading was unusual because it did not know of any material or undisclosed facts.
In the statement, the company also reiterated its commitment to keeping its shareholders informed and informing the general market about relevant acts or facts under applicable regulations. It is available for clarifications if needed.
Investors are reassured by such transparency, since a spike in the price of shares could indicate underlying problems with solvency or trading habits that may be speculative.
Volume and Demand Dissection
Nord Research, according to InfoMoney, said that the extraordinary trading volume was behind this massive rally.
The volume of trade for Casas Bahia on March 10 at 3:30 pm Brasilia time reached 21,8 million shares. This is more than the 5 million share average daily trading traffic for last year.
The increase in trading activity raises the possibility that the market was influenced by a “short squeeze”.
This forces short-sellers to purchase shares in order to close their positions, which increases the upward pressure on prices.
Nord analyst Rafael Ragazi stated that the fervour was undoubtedly a result of the substantial short interest in the company, which has around 25% leased out.
Ragazi stated that the value of the company on the stock market is only R$470m after it fell by more than 95% between July 2022 to the end last month.
The recent increase is even more shocking because of the dramatic fall that occurred in the months prior. This indicates a change in investor attitudes.
XP Research has confirmed to InfoMoney 24.7% (or the shares) of the company are in a “short” position. This is a 4.4 percent increase within just 14 days.
Short selling is on the rise, which means that many investors have placed bets against the stock.
What is to be expected on the short-term?
The mood of the market remains positive as the company gets ready to announce its quarterly results, which will be on 12 March.
Investors are likely to focus their attention on the Q4 report 2024 for insight into the recent decline of the stock and possible turnaround plans.
It is not clear if this momentum will continue after the election results.
This article Brazil’s Casas Bahia stocks jump 30% in one day and 77% up this month. Here’s what you need to know could be updated as new information becomes available.
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