Individual Investor Numbers Grow 35% to 4.6 Million at B3 Despite Market Volatility

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12/05/2022

Number of investors grows at B3 despite a volatile wider scenario

An unprecedented study of investors’ behavior in the election month of October found increased trading volume and higher values for all investment types at the exchange

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São Paulo, November 21, 2022 – Despite the global uncertainty that increased market volatility, the number of individual investors in equity securities at B3 grew 35% between the third quarter of 2021 and the same period in 2022, to 4.6 million from 3.3 million. Between the second and third quarters of 2022, the number of investors grew by 200,000. These figures are contained B3’s most recent findings, which were published today.

An increase to the Selic lending rate meant the number of investors in fixed income products rose to 12.6 million from 9.6 million. There were more than 2.1 million individual investors in Tesouro Direto in the period, up 25% on the third quarter of 2021.

“The figures show that Brazilians continue to seek investment opportunities and diversification, whether in exchange-traded or fixed-income products. These data show that there is still enormous potential in the country and that millions of people have already begun to diversify their portfolios beyond traditional savings. This explains the positive balance and recurring growth of the number of individual investors in recent years,” says Felipe Paiva, B3’s Client and Individual Investor Relations Director.

Flow and activity of investors remain positive in Brazilian election month

B3’s complementary survey of the third quarter of 2022 resulted in an unprecedented study into the activity of individual investors in October, a month that was characterized by increased volatility due to the electoral process. The study showed that the number of individual investors on the exchange grew again, with a higher trading volume and a higher share of assets under custody.

Average daily trading volume in the cash equity market rose 18% to BRL 9.2 billion from BRL 7.8 billion. The most traded product was equities, with a 20% increase in daily volume compared with the third quarter of 2021, followed by ETFs at an increase of 17%.

The volume of equity products in custody rose BRL 11 billion between September and October, to BRL 504 billion.

Fixed income, was a particular highlight, gaining 100,000 new investors in the month. Fixed income instruments in B3 custody rose by BRL 30 billion to BRL 1.485 trillion. Tesouro Direto is close to reaching its record of BRL 100 billion in custody.

| Product/Segment | Investors (Individuals) | Value in Custody (Individuals) | ADTV (Ind.) |
| Equity | 4.6M | BRL 504B | BRL 9. 2B |
| Tesouro Direto | 2.1M | BRL 96. 9B | - |
| Fixed Income | 12.7M | BRL 1.485B | - |
| Cash Equities | 3.4M | BRL 370B | BRL 8.3B |
| Real Estate Fund | 1.9M | BRL 108.5B | BRL 336M |
| BDR | 528K | BRL 8.3B | BRL 339M |
| ETF | 1.5M | BRL 6.6B | BRL 183.6M |

This October analysis is not included in the full report published in November. The October information was analyzed separately.

First time investments of up to BRL 40 reach 31% of the total

Of the 106,000 individuals who debuted in equity at B3 in September, 31% made their first investment with values of up to BRL 40 and another 29% at between BRL 40 and BRL 200. This underscores how more Brazilians have discovered equity products at a lower initial investment and have experimented with new options, with a view to greater long-term gains.

Investors are ever more aware of the importance of diversification

In 2016, 21% of investors had more than five tickers in their portfolios. That figure has now risen to 37%. Those with more than five tickers in their portfolios are now responsible for 73% of the individual investor balance in custody at the exchange.

Six years ago, 75% of individual investors at B3 invested solely in equities. In 2022, this percentage fell to 33%. Another 17% invested both in equities and investment funds and 14% of investors opted to invest solely in BDRs. The percentage of individuals who invest solely in real estate funds is 10%.

Investment in equities is more democratic

The background of global uncertainty and higher interest rates did not prevent an increase in the number of investors in equities, to 3.3 million individual investors at the end of September. This number was accompanied by a reduction to the average amount invested. In 2021 the average in balance was BRL 6,000, but in 2022 that figure was halved to BRL 3,000, showing how the exchange is becoming ever more democratic.

In 2022, for example, 1.5 million investors executed at least one transaction at B3 in the month. Individual investors now represent 16% of all trading volume of the Brazilian exchange’s cash market.

“The study showed once again that investors have been allocating their cash into different product classes, such as fixed income, equities, Tesouro Direto and funds such as Fiagros. They also have equity portfolios that contain a larger number of assets. Diversification is an ally of those who are ever more attuned to the ups and downs of the financial market, whether in more conservative assets or higher risk ones. It’s important that we share this data with financial agents, advisors and opinionmakers so that they can complement their analyses about this structural transformation that we are experiencing with the market,” said Paiva.

More than 90% of Fiagros in the hands of individual investors

In the case of Fiagros, launched in March 2021, 91% (BRL 4.2 billion) of the amount in custody is in the hands of individual investors. There are now 116,000 investors who have this product in their portfolios, with an average amount in balance of BRL 4,000. Fiagro has a structure that is notably similar to real estate funds, but which is aimed at agribusiness assets.

Number of investors in BDRs grows 380% to nearly 1.5 million

The number of investors in Brazilian Depositary Receipts (BDRs) grew the most among equity securities in the year, by 380% to 1.5 million investors from 306,000 in the third quarter of 2021.  The value in custody grew 23% in the period, to BRL 6.8 billion and Average Daily Trading Volume (ADTV) rose 8% to BRL 171 million.

Individual investors have had access to BDRs since October 2020. The instruments were previously restricted to qualified investors. BDRs allow investors in Brazil to buy securities that represent the equities of companies listed abroad. In practice, the product grants local investors the option of investing in companies headquartered in other countries with the same ease with which they acquire shares in Brazil and entails buying and selling in Brazilian Reals. Individual investors can choose from 848 BDRs for single stocks and from 100 ETF BDRs. These are an investment alternative for those who want part of their portfolio to have exposure to the international market. Like other BDRs, ETF BDRs are securities issued in Brazil that are backed by ETFs issued abroad.

In one year, the value invested fixed income doubled to BRL 1.45 trillion

Interest rates remained at two digits in this period and investors nearly doubled their amount in fixed income, by 48% to BRL 1.45 trillion at the end of September 2022 from BRL 985 billion at the end of the third quarter of 2021.

Bank CDs continued to be the fixed income product with most individual investors, at 9.3 million. The BRL 603.5 billion in balance in these instruments was up 23% on the same period in 2021. The LCA income-tax exempt alternative for investors with agribusiness assets in their portfolios had the largest growth level in terms of individual investors in the period, by 86% to 1.3 million investors, with BRL 315 billion in balance.

Tesouro Direto: number of investors and amount in custody grow

In addition to the 25% growth to the number of individual investors in the product, the value in custody grew 35% compared with the same period in 2021 to BRL 95.5 billion. Among Tesouro Direto securities, Tesouro IPCA (NTN-B Principal), whose yield is linked to the IPCA inflation rate, plus previously defined interest, continues to have most investors, at 40%. Soon after comes Tesouro Selic (LFT), whose yields are linked to the Selic rate.

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