Previously one of the most maligned single-country emerging markets exchange traded funds, the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) is on an impressive run.
The largest ETF tracking Latin America’s largest economy, EWZ is higher by nearly 13% over the past month. In the 25 trading days starting March 19 and ending April 23, EWZ has closed higher on 16 occasions. With Thursday’s close at $36.27, just 10 cents off the intraday high, EWZ finished at its highest level since late January.
EWZ’s recent rally has elicited an epic run for its triple-leveraged equivalent, the Direxion Daily Brazil Bull 3x Shares (NYSEArca: BRZU). On volume that was 77% above the daily average, BRZU surged almost 8.2% on Thursday, bring the ETF’s one month run to 39.5%. That is more than triple EWZ’s performance over the same period, indicating BRZU is doing an excellent job of delivering triple the daily returns of the MSCI Brazil 25-50 Index. [A Different View of Leveraged ETFs]
Entering Thursday, BRZU’s average daily return for the previous 30 days was 5.7%. Sitting on April gain of nearly 58%, BRZU is one of Direxion’s top-performing triple-leveraged bullish ETFs this month.
When we highlighted BRZU on April 15, we noted that since the start of the year, BRZU has seen its shares outstanding count surge 52%. Since that day, investors have poured another $3.32 billion in BRZU. [Loving Leveraged LatAm ETFs]
The ETF’s continued upside and inflows have remained steady in the wake of Direxion announcing earlier this week that BRZU is heading for a 1-for-10 reverse split, which will be effective at the open of the market on May 20, 2015, according to a statement issued by Direxion.
Amid a corruption scandal at Petrobras (NYSE: PBR), Brazil’s state-run oil company and one of EWZ’s largest holdings, high interest rates, a rising current account deficit and slack economic growth, investors yanked $453.5 million from EWZ in the first quarter.
Petrobras surged 5.3% on nearly triple the average daily volume Thursday after the company said its corruption scandal will cost it at least $2.1 billion. With the stock up 60% in the past month and having closed at its best levels since December yesterday, it is not a stretch to say markets have priced in the worse for Latin America’s largest publicly traded oil company. That is good news for BRZU and EWZ.
Direxion Daily Brazil Bull 3x Shares
Chart Courtesy: Bloomberg