In February, Moody’s downgraded debt issued by Petrobras (NYSE: PBR) to Ba2, two levels below investment grade, stoking speculation regarding Brazil’s sovereign credit rating. Slack GDP estimates and a tumbling real are among the downside catalysts pressuring Brazilian stocks and EWZ. Brazil’s planning ministry attributes a major portion of the turn to the projected depreciation of about 21% in the real currency against the U.S. dollar. [Brazil ETF Slides, Bleeds Assets]
Brazil banks, which comprise nearly 32% of EWZ’s weight and lend to slumping commodities producers, are also found in the sub-$10 group. Itau Unibanco (NYSE: ITUB) and Banco Bradesco (NYSE: BBD), EWZ’s two largest financial services holdings, reside below $9 and $8, respectively.
Add up EWZ’s holdings of various Banco Bradesco, Itau Unibanco, Petrobras and Vale securities, and the result is over 31% of the ETF’s having U.S.-listed shares that trade below $10.
iShares MSCI Brazil Capped ETF
