Emerging markets are one of the more popular themes in our investing universe and their may be potential for growth in Latin America, most notably Brazil, and their related exchange traded funds (ETFs).
Latin American countries have been undergoing large infrastructure programs and they are likely to continue after the global recession has abated, writes Katie Puckett for Building.
In Brazil, the government’s growth acceleration program will continue into 2010, and it includes $231 billion for social, transport infrastructure and energy projects. In the second quarter of 2008, civil engineering progressed 10% higher than for the same quarter in 2007. A National Plan for Logistics and Transportation will also continue into 2023, including a budget of $79 billion.
According to Don Vialoux for Financial Post, there are some indicators, or “influences,” that favor some allocation into Brazilian-related stocks and ETFs:
- Seasons. The Brazilian Bovespa stock index has a seasonal rhythm and the peaks tend to lie between the end of October and end of May. It is calculated that the average gain per period was around 16.4%.
- Trends. The intermediate trend is up with the index above its 50-day moving average.
- Fundamentals. Brazil is still a major producer of copper, crude oil, gold, silver, iron ore and coal. All of these commodities are still in demand and that demand is on the rise.
- Performance. The Moving Average Convergence Divergence recently started an uptrend and the Brazilian index’s shows stronger gains compared to that of the S&P 500 index.
- Optimism. Brazil’s government has gleefully estimated a 2% growth for GDP this year.
Wait for the signs of a potential long-term uptrend in Brazil’s ETF first. We utilize the 200-day moving average.
- iShares MSCI Brazil Index (EWZ): up 12.1% year-to-date
- iShares S&P Latin America 40 Index (ILF): up 4.3% year-to-date
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.