SAO PAULO: The longest hiatus in Brazilian initial public offerings (IPOs) in at least two decades is likely to come to an end as early as the second quarter, according to investment bankers.

       After a more than two-year drought, underwriters from Bank of America Corp (BofA) to Morgan Stanley expect activity to pick up amid signs that the Federal Reserve is done with its hiking cycle and as interest rates decline at home.

       Companies from sectors such as infrastructure, retail, technology and real estate could come to market, according to BofA.

       The transactions would be part of a long-awaited global recovery in IPOs and secondary share sales that have been in the doldrums since interest rates soared in the United States, damping the appeal of equities.

       Now Treasury yields in the United States are retreating and Brazil stands out among its peers as growth holds up, said Fabio Nazari, head of equity capital markets and a partner at Banco BTG Pactual SA.

       “It’s the best environment in three years” for companies gearing up to tap the markets, Nazari said in an interview.

       BTG, which was the top underwriter for Brazilian equity offerings last year in a Bloomberg ranking, sees room for Brazil share sales to grow as much as 60% from the nearly 40 billion reais (US$8.2bil) recorded last year.

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       There has been no IPO in the South American country since fertiliser maker Vittia Fertilizantes E Biologicos SA debuted in September of 2021, while Nu Holdings Ltd’s blockbuster US deal in December of that same year marked the latest initial offering by a Brazilian company.

       Brazilian share offerings fell by 34% to 39.6 billion reais in 2023, capping a tough year for investment-banking fees. In addition to the US bond rout and increased volatility, local hedge funds and equity funds continued to face massive withdrawals amid high rates, curbing the appetite for transactions.

       As borrowing costs move lower in the biggest Latin America economy, more investors will be attracted to riskier products such as equities, said Marcello Lo Re, head of Latin America equity capital markets for Morgan Stanley.

       2W Ecobank said it had engaged banks for a potential transaction, while battery-metals miner Sigma Lithium said it could list its Brazil subsidiary on both the Nasdaq and Singapore Stock Exchange. — Bloomberg