Brazil Remains a Prime Destination For EM Investors

The iShares MSCI Brazil Capped ETF (NYSEArca: EWZ), the largest Brazil exchange traded fund trading in the U.S., is up more than 11% this year and some market observer remain fond of the country’s high-flying equity market.

The outperformance in Brazil’s market comes as investors anticipate key reforms, such as pension reforms, in the coming months under the new President Jair Bolsonaro.

Brazil’s new president received overwhelming support from voters, winning the presidency in October with 55% of the vote as Brazilians became increasingly vexed with the surge in violence and slow economic recovery.

“Brazilian stocks are up sharply this year. The Bovespa index, Brazil’s benchmark index, hit an all-time high recently and the EWZ is up more than 10 percent in 2019. Brazilian stocks are also outperforming the broader EEM fund this year,” according to CNBC.

Banking On Brazil

Furthermore, Brazilian stocks are expected to strengthen on the slowdown in U.S. Federal Reserve rate hikes, which is also expected to boost broader emerging markets as the U.S. dollar loses its support. Brazil’s market is also expected to benefit from a privatization and deregulation under the Bolsonaro administration.

Bolsonaro has promised wide-ranging reforms aimed at stomping out corruption in Latin America’s largest economy. His ability to make good on the promised reforms is seen as pivotal to the fortunes of Brazilian assets in 2019. Brazil’s economy is expected to post GDP growth of just over 2% this year and 2.7% in 2020.