Brazil country-specific exchange traded funds are bouncing on optimism that President Dilma Rousseff will finally be removed from office and that a new administration may steer the economy toward growth.
On Monday, the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) increased 2.9%, VanEck Vectors Brazil Small-Cap ETF (NYSEArca: BRF) rose 2.9% and iShares MSCI Brazil Small-Cap ETF (NYSEArca: EWZS) gained 2.3%.
SEE MORE: Brazil ETFs Roar Back as Government Incompetence Ends
Brazilian equities have been among the best performers among the emerging markets of 2016, with EWZ up 60.7%, BRF up 62.1% and EWZS up 67.0% year-to-date.
Brazilian markets strengthened on hopes that acting President Michel Temer, who will remain as the country’s leader if the Senate decides to impeach Rousseff, will be able to re-align the country’s finances and restore growth, reports Denyse Godoy for Bloomberg.
Rousseff appeared before Congress Monday to defend herself against accusations of budgetary mismanagement. She has been accused of tax peddling and the Rousseff administration has been associated with corruption.
[related_stories]“Now the market will start pricing in the economic recovery,” James Gulbrandsen, Latin American chief investment officer at NCH Capital, told Bloomberg. “I don’t believe Temer will be able to pass all the measures he wants to, but the previous administration was so horrible that anything they get is better.”
SEE MORE: Brazil ETFs Strengthen on Realistic Government Guidance
Leading the charge on the Brazilian index, Banks Itau Unibanco Holding SA and Banco Bradesco SA contributed to the most to the equity market’s gains Monday.
Itau Unibanco is the largest component of EWZ, accounting for 10.9% of the ETF’s portfolio. Banco Bradesco also makes up 8.0% of EWZ’s underlying index. EWZ includes a hefty 35.7% tilt toward the financial sector.
For more information on the Brazilian markets, visit our Brazil category.
iShares MSCI Brazil Capped ETF