What Brazil's Upgrade Would Mean for ETFs | ETF Trends

Moody’s Investor Services is eyeing Brazil for a possible upgrade, which could give a boost to its exchange traded fund (ETF), which is already one of the year’s top-performing funds.

The possible upgrade of Brazil to investment-grade is good news for the country’s financial sector and its economy as a whole. Peter Medved for Seeking Alpha reports that in late August, the country’s finance minister Guido Mantega said that the announcement that Moody’s would join both Fitch and Standard & Poor’s in giving Brazil an investment-grade rating should come in September.

The sector to benefit the most will be the financial sector, which has suffered from the country’s ceiling on foreign currency debt and deposit ratings. After an upgrade, the major banks should be able to ascend the ratings ladder. The timing is key, too, because two banks in the country are aiming to launch IPOs in the fourth quarter, along with ADR listings on the New York Stock Exchange.

Retail investors should also enjoy this good news, as a better rating will lead to improved investor sentiment and a possible continued uptrend.

  • iShares MSCI Brazil Index (NYSEArca: EWZ): up 92.1% year-to-date; financials are 19.6%

For more stories about Brazil, visit our Brazil category.

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.