(Bloomberg) -- Brazil’s Petrobras sank to the lowest in a month after Luiz Inacio Lula da Silva won the presidential election, with traders growing concerned about how the left-wing leader’s policies will impact Latin America’s largest oil company.

Preferred shares in Petroleo Brasileiro SA closed 8.5% lower in Sao Paulo Monday, trimming year-to-date gains and erasing almost $4 billion from the firm’s market capitalization. The stock had already suffered its worst week since February 2021 as support for incumbent Jair Bolsonaro showed signs of stalling.

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“This new administration has openly criticized how Petrobras has been run and has also discussed likely changes at the company,” said JPMorgan Chase & Co. analysts including Rodolfo Angele who downgraded their rating on the stock to neutral from overweight. “The main ones should be on capital allocation and pricing policy for fuels sold domestically.”

Petrobras was the worst-performing name on the nation’s Ibovespa index at the start of the week, as investors now focus on what should be Lula’s picks to run state-owned enterprises. 

“Until there is more visibility on what Lula’s economic plans will look like, there should be weakness in SOEs, particularly Petrobras,” said Frederico Sampaio, the chief investment officer for equities at Franklin Templeton’s Brazil unit.

Lula has vowed to use the company as a vehicle for national development. He has signaled that Petrobras could embark on a fresh cycle of investment in lower-return assets such as refineries. The company would also become a global player in the energy transition, even if it means lower profits and dividends, Senator Jean Paul Prates, Lula’s point person for oil and gas, said last month.

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The stock price will not fully reflect fundamentals until investors have clarity on any upcoming changes in the firm, JPMorgan’s Angele said. “This should take, in our view, at least six months.” 

Although Bolsonaro unnerved Petrobras investors by pressuring it to contain fuel prices -- and firing three of its chief executive officers for failing to do so -- the firm enjoyed growing production, record profits and massive dividends on his watch. The company is set to post earnings on Thursday, with some analysts seeing room for the firm to announce as much as $9 billion in dividends. 

“All in all, market participants seem wary that Lula would move away from the free market dogma of his predecessor to more government interventionism,” said Stephane Ekolo, a strategist at Tfs Derivatives Limited.

--With assistance from Neil Chatterjee.

(Updates to market close.)

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