Ahead of Brazil’s national elections next month, among the most anticipated in the emerging world this year, investors are piling into exchange traded funds tracking Brazilian equities on expectations a change in government will boost a sagging economy.
The iShares MSCI Brazil Capped ETF (NYSEArca: EWZ), the largest and most heavily traded Brazil ETF, has pulled in $424 million in new assets this month, the most among 47 global ETFs, reports Denyse Godoy for Bloomberg.
Although some recent polls have shown firming support for President Dilma Rousseff, which has pressured EWZ this month, a Vox Populi poll published on Monday showed the incumbent Rousseff would be tied with socialist candidate Marina Silva in an Oct. 26 runoff. Under Brazilian law, a runoff can only be averted if one candidate receives more votes in the Oct. 5 election than the other two candidates combined. Social Democratic candidate Aecio Neves is also in the race, but badly lagging Rousseff and Silva. [Brazil ETF Extends Silva Rally]
Faltering economic growth in Latin America’s largest has made Rousseff, who came to power in 2011, increasingly vulnerable. Brazil’s central bank said earlier this month private sector economists are expecting Latin America’s largest economy to grow a scant 0.7% this year. By comparison, Colombia’s economy, South America’s second-largest, is expected to grow 4.7% this year while Peru’s GDP is forecast to jump 5%. [Risk on for Brazil ETFs]
Inflows to EWZ come as investors have added just under $32 million to the iShares Latin American 40 ETF (NYSEArca: ILF) this month. Investors have also pulled $35.6 million from the iShares MSCI Mexico Capped ETF (NYSEArca: EWW) this month.