Stimulus Could Boost Brazil ETFs
February 27th, 2013 at 10:27am by Tom Lydon
After the lackluster growth over 2012, Brazil’s economy could strengthen this year as the government steps in to stimulate the economy, bringing investors back to Brazilian stocks and related exchange traded funds.
Brazil’s government has increased government expenditure and enacted policies to stimulate consumption, which have kept unemployment rates low compared to other developed countries, Zacks reports. [Brazil ETFs Rebounding After Tough 2012]
Specifically, the country’s central bank cut interest rates to increase liquidity, diminish consumers’ debt burden and encourage investments. Meanwhile, the government implemented a series of stimulus measures, such as increased infrastructure spending before the country hosts the 2014 World Cup and the 2016 Olympic Games.
Looking at the Brazilian economy, manufacturing activity is rebounding at the start of the year. The lower tax burden on companies, lower pay roll tax and increased infrastructure spending fueled activity in the sector.
Moreover, the depreciating Brazilian real currency should also help the country’s export industry.
Investors interested in Brazil can consider a number of ETF products. For instance, the iShares MSCI Brazil Index Fund (NYSEArca: EWZ) provides exposure to the Brazilian market, with an emphasis on large-cap equities, such as Vale, Itau Unibanco Holding andPetrobras. Top sectors included financials and materials, which combined make up 45.9% of the portfolio. EWZ has a 0.60% expense ratio.
Investors can also access small-cap segment of Brazil’s market with the Market Vectors Small-Cap ETF (NYSEArca: BRF). BRF has a heavier concentration to consumer discretionary and industrials, which combined make up 56.8% of the fund. The ETF has a 0.59% expense ratio.
Additionally, the EGShares Brazil Infrastrucuture Index ETF (NYSEArca: BRXX) offers a focused approach to the country’s infrastructure boom. The ETF is exposed to electricity, gas, water, mulch-utilities and real estate investment & services. BRXX has a 0.85% expense ratio.
For more information on Brazil, visit our Brazil category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.