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.
For more information on the Brazilian markets, visit our Brazil category.
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