More often than not, if you tell me that an asset is roughly 20% above its long-term trendline, I will tell you that the investment is overbought. I might even explain that a pullback to the 200-day moving average is a necessary prerequisite before buying the asset or, at the very least, an 8%-10% sell-off prior to purchase.
Technical analysis concerns notwithstanding, iShares MSCI Brazil (EWZ) has broken out of a multi-year bearish downtrend. This exchange-traded tracker forfeited more than 50% in value between October of 2011 and Q1 of 2014. Then market participants began to notice the price-to-earnings (P/E) discounts relative to developed world alternatives. They also lowered their expectations for economic growth. Eventually, braver souls dangled a few toes into the Amazon River.
Emerging market ETFs like iShares Brazil (EWZ) haven’t received this kind of love in seven years. What’s more, you can own EWZ for roughly 33% less than what an advocate might have paid for it near the tail end of 2011. I am not suggesting that you chase the rally; you will need to forge your own conclusions. Nevertheless, Brazil (EWZ) offers reasonable reward for the risk.
Is the upswing for iShares Brazil (EWZ) the only one that is worthy of investigation? Hardly. You might be intrigued by the prospect of owning a basket of Chinese companies for less than what one paid for SPDR S&P China (GXC) nearly four years ago. Or perhaps you would prefer a piece of India via WisdomTree India (EPI) at a 15% discount off of 2011 prices.