- Brazilian equities and ETFs among worst performers in 2015, but emerging market has roared back
- Brazilian rally went into high gear after former President Luiz Inacio Lula da Silva was detained
- Traders had been selling off Brazilian assets over the past year as Rousseff failed to stimulate the economy
Brazilian equities and country-specific exchange traded funds have been among the worst performers last year, but the emerging market has roared back.
The iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) has surged 45.3% since its January 21 low. EWZ is now trading back above its long-term, 200-day simple moving average.
Vale and Petrobras shares have led Brazilian markets higher on a rebound in raw materials prices, Reuters reported.
Vale, the world’s largest iron ore miner, strengthened to four month highs as iron ore prices jumped. Traders are betting that Chinese steel mill demand could rise ahead of an international horticultural exposition later this year.
The rebounding crude oil prices also bolstered state-controlled oil company Petroleo Brasileiro.
EWZ includes a 2.3% tilt toward Vale SA and 3.3% in Petrobras. The energy sector makes up 9.9% of the ETF’s portfolio and materials is 9.3% of underlying holdings.
Earlier this month, Brazilian shares jumped as many traders believed the country is moving past a political gridlock that could lead to changes in the government and potentially kick-start the stagnate economy, Bloomberg reported.
The Brazilian rally went into high gear after former President Luiz Inacio Lula da Silva was detained, adding to speculation that support will grow to impeach his successor, President Dilma Rousseff.
“The market has been held hostage by corruption and incompetence,” James Gulbrandsen, the chief investment officer for Latin America at NCH Capital told Bloomberg. “The rally in Brazil is merely a glimpse of the gains that are possible with a reversal in the overwhelming incompetence that has dominated Brazil over the last decade.”
Traders have been selling off Brazilian assets over the past year as Rousseff failed to stimulate the economy prevent credit downgrades.
iShares MSCI Brazil Capped ETF