ETF Trends
ETF Trends
  • Beaten up and vilified Latin American ETFs are rebounding
  • Multiple factors are dragging on the Brazilian economy
  • Unemployment rose to 7.9% in September from 4.7% in October last year
  • Inflation has jumped over 10% for the first time since 2002
  • The budget deficit has widened to 9.5% of GDP

An encouraging sign among rebounding emerging markets stocks and exchange traded funds this year has been the participation of previously beaten up and vilified Latin American shares. For example, the iShares Latin American 40 ETF (NYSEArca: ILF) is up 14.1% year-to-date after being one of the worst-performing regional ETFs over the past couple of years.

As an oil exporter, Mexico’s currency has been hit by the falling crude oil prices – ETF investors should keep in mind that while Mexico has a large oil industry, none of the country-specific ETFs include exposure to the sector. However, Mexico’s commodities exposure has not punished EWW as harshly as falling commodities prices have done to the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ).

Multiple factors are dragging on the Brazilian economy. Unemployment rose to 7.9% in September from 4.7% in October last year. Inflation has jumped over 10% for the first time since 2002. The budget deficit has widened to 9.5% of GDP. Additionally, lower commodity prices, diminishing consumer credit boom and a corruption scandal at state-run oil giant Petroleo Brasileiro have all weighed on the economy. [Corruption Probe Plagues Brazil ETF]

Brazil and Mexico are the largest country weights in ILF, but the good news is ETFs tracking both countries are rebounding.

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.

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