Brazil has been a hot country for several years and the exchange traded fund (ETF) following the country has too. That’s not to say there have not been any setbacks. Normally, it’s a country’s internal issues that cause setbacks (i.e. elections), however Brazil tells another story. Christopher Ecclestone and Mark Turner of Hallgarten & Co. report that even after Lula’s reelection, the country’s success sustained. It appears foreign money and the yen carry trade are the culprits for two recent market "pullbacks". As the money rushes in and out of the country, it isn’t apparent if the money is the same cash flow that rushes back in when the coast is clear. It could be local money from discount shoppers or even Latin American enthusiasts who enjoy trading internationally.
Mega-caps seem to rule in emerging markets and ETFs such as iShares MSCI Brazil (EWZ). EWZ holds 44 stocks, with top holdings Petroleo Brasileiro SA Petrobas, 12.58%; Cia Vale Rio Doce, 11.23%; and Petroleo Brasileiro, 10.18%. The ETF is up 11% year-to-date and 33% for the past 5-years.
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.