The iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) is the largest and most heavily traded ETF tracking Latin America’s largest economy. As a result, it is the most discussed Brazil ETF and, until recently, most of the 2013 conversation pertaining to EWZ has been negative.

After falling into a bear market earlier this year, Brazil’s benchmark Bovespa has gained 19.96% since July to be precise, putting the index just tenths of a percentage point away from entering a new bull market. EWZ is participating in the Brazilian bounce. Monday’s gain of 3.6% for the ETF occurred on more than double the average daily volume, helping run EWZ’s five-day gain to nearly 9%. [Bank on Brazilian Banks With This Small ETF]

Good news for some of EWZ’s largest holdings is translating into good news for the ETF. Monday’s gain for EWZ was underpinned by news that J.P. Morgan issued a bullish call on Vale (NYSE: VALE), the world’s largest iron ore maker. In fact, Vale, unlike other Brazilian equities has been benefiting from a weaker Brazilian real. [Taper Talk Pummels Local Currency Bond ETFs]

“Vale has so far realized $1.6B in cost savings during 1H13, and while the company does not have any official target for cost savings, it expects 2013 to finish at over double the 1H13 achievement. The savings are permanent, and present a great source of value generation. A weaker BRL has been a major tailwind, and every R$c10/USD depreciation generates ~$700M in cost savings and thus EBITDA,” according to part of a J.P. Morgan note posted on Barron’s.

The bank has a $25 price target on Vale’s American depositary receipts, implying more than 50% upside from where the stock closed in New York Monday. The bullish view on Vale jibes with the historically intimate correlation between Brazilian stocks and ETFs and Chinese economic data. Brazil counts China as one of its largest export markets. Simply put, it is not a coincidence EWZ rallied on Monday following a series of strong Chinese data points, including export/import data released over the weekend.