A Possible Catalyst For Brazil ETFs

Banks in Latin America’s largest economy appear inexpensive, those institutions are faced with declining consumer credit quality. Analysts believe the same is true of Brazilian banks. After a couple of years of contracting, Brazil’s economy is expected to resume growing this year, a factor Brazilian stocks and ETFs could already be pricing in.

Financials are the largest sector weight in EWZ at more than double the allocation assigned to the ETF’s second-largest sector weight.

“The Brazilian economy remains deeply stigmatized by its fundamental credibility problem in regards to public finances. The turn from a vicious recessionary cycle to a virtuous growth cycle will definitely require a herculean effort by Brazilian policy makers and business people. However, easier USD funding due to a generalized reflationary trade, coupled with a solid commodities rally, and a friendly central bank, offer an unexpected boon to this economy,” adds Seeking Alpha.

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