In the case of some Brazil ETFs, Friday’s closes were not just 52-week, but mult-year lows. The Market Vectors Brazil Small-Cap ETF (NYSEArca: BRF) closed at its lowest point in four and a half years while the rival iShares MSCI Brazil Small-Cap ETF (NYSEArca: EWZS) hit an all-time low. Same goes for the EGShares Brazil Infrastructure Index Fund (NYSEArca: BRXX).
Brazilian bonds are no more attractive than stocks. Standard & Poor’s ratings firm has expressed concern over Brazil’s worsening fiscal accounts and may even downgrade the country’s BBB credit rating. Both S&P and Moody’s Investors Services have lowered their outlook on Brazil’s sovereign rating. [Brazil Credit Rating in Danger]
There are glimmers of hope for the patient, though that does not mean Brazil ETFs need to be immediately purchased.
“But with the volatility currently being experienced by emerging markets as the Federal Reserve tapers, and ahead of October Brazilian presidential elections, the scaling of Brazil investments among non-dedicated emerging markets investors should be moderated, even as our dedicated emerging markets strategies underwrite this heightened uncertainty. The bar has been raised for the Brazilian authorities to show progress in restoring a policy mix that attracts investment, restores confidence and delivers robust growth with moderate inflation. Without this, the outlook for order in financial markets (and on the street) in Brazil is less certain,” writes Pimco Managing Director Michael Gomez.