Amid a slew of domestic issues, including a labor strike, the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ), the largest ETF tracking Brazilian equities, tumbled nearly 15% last month.
EWZ now labors 26% below its 52-week, confirming that Brazilian stocks are in another bear market. Some market observers believe that investors looking for value in Latin America’s largest economy should exercise patience.
“Global jitters and a devastating national truckers’ strike combined to make May an awful month for the No. 3 emerging market by capitalization. The iShares MSCI Brazil exchange-traded fund (ticker: EWZ) plunged by 15%, while the currency, the real, lost 6% against the dollar,” reports Craig Mellow for Barron’s. “But investors are not rushing to make rebound bets until they see more clarity around a wide-open presidential election scheduled for October.”
Tepid Data for Brazil Economy
Economists surveyed by the central bank have lowered their 2018 gross domestic product outlook to 2.5%, or 0.4 percentage points lower than the four months prior. The recent trucker strikes has also lead to Alfredo Coutino, Latin America director for Moody’s Analytics, to lower 2018 growth expectations to 2%, with knock-on effects potentially dragging it even lower.
Weak data points and a slumping real could prevent Brazil’s central from lowering interest rates again, which would disappoint investors betting on multiple rate cuts in Brazil at the start of this year.