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People look at an electronic board showing the graph of the recent fluctuations of market indices at the floor of Brazil's Bovespa Stock Market in downtown Sao Paulo, Brazil, May 9, 2016.

PAULO WHITAKER/REUTERS

For months, investing in Brazil has been a breeze. Buying into any asset class delivered some of the world's biggest gains as traders cheered on President Michel Temer's pursuit of austerity measures designed to rein in a ballooning budget deficit.

That changed abruptly Wednesday evening, following reports that Mr. Temer approved illegal payments to a disgraced lawmaker who had orchestrated the impeachment of his predecessor. Investors smelled a disaster in the making and markets staged a massive sell-off Thursday with everything from the real to the Ibovespa to Brazilian bonds tanking.

Yet, some brave fund managers are bringing out their calculators and looking for buying opportunities amid the chaos. Sure, they acknowledge, Mr. Temer might well be on his way out and his ambitious plans to rein in the pension system and change Brazil's labour laws seems imperilled, but Latin America's biggest economy still holds a lot of value for investors willing to put in the work.

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"In the short term, this is negative for social-security reform and for sentiment, but we're the kind of fund that, when prices fall, we're more inclined to buy," said Adrian Landgrebe, an emerging-markets portfolio manager at Sagil Capital in London. "We see some really extreme moves and those are the kind of things that we look to buy."

Brazilian assets staged somewhat of a recovery Friday, with the real rallying and the Ibovespa adding 1.69 per cent.

Sovereign bonds also advanced.

It followed a rout on Thursday. The real fell the most since 1999, the Ibovespa tumbled to the lowest point since January and government bonds posted the biggest loss in emerging markets.

No one is saying it's all smooth sailing from here. But the optimists say Brazil is a massive economy with a large middle class and abundant natural resources and at some point it'll regain its footing.

Brazilian assets had rallied over the past 18 months as investors gained confidence that the government would be able to tackle the excessive spending and low tax revenue that had resulted in the loss of its coveted investment-grade rating. The Ibovespa surged 69 per cent in dollar terms last year, while the real strengthened 22 per cent, the best performance in the world for both stocks and currencies.

Marcelo Assalin, who manages $8.5-billion (U.S.) as head of emerging-market debt at NN Investment Partners, said Thursday's sell-off was exacerbated by the fact that so many big investors were overweight Brazil and were quickly trying to unwind their positions. He said the outlook for markets is dependent on how fast an institutional solution takes shape.

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"The time will come to search for good investing opportunities," he said.

"This is the time to be calm and wait for more clarity. Brazilian assets offer good value to investors who have a longer-term approach."

Several analysts say that Ambev SA, the Brazilian unit of Anheuser-Busch InBev, could be a good stock pick. Deutsche Bank AG wrote in a note that the beer maker's currency hedges would help protect it from a weaker real, and Morgan Stanley strategist Guilherme Paiva also cited it as a good value.

Investors should favour high-quality companies able to withstand prolonged political uncertainty and economic weakness, Paiva wrote. In addition to Ambev, he recommended shares of pulp and paper maker Fibria Celulose SA, dental insurer Odontoprev SA and Ultrapar Participacoes SA, a fuel distributor.

Fibria and its rivals Suzano Papel & Celulose SA and Klabin SA were some of the few bright spots among Brazilian stocks Thursday, rallying on speculation that a weaker currency will boost their competitiveness by making their exports cheaper in dollar terms.

Iron-ore miner Vale SA is also a good bet, according to Tony Robson, chairman of Global Mining Research in Sydney, who said the company's fundamentals remain sound.

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