ETFs to Watch as Brazil is Set to End 1st Half in Correction Territory

Emerging markets were no doubt hit hard by the coronavirus pandemic, leaving a lot of EM countries in correction territory in their respective markets–size not being a factor in helping to mute the effects. Brazil, one of the largest EM countries, is also looking to end the first half of the year in correction territory.

“Brazil’s stock market index, the Bovespa, has rallied over 31% during the second quarter,” a CNBC article duly noted. “But, despite significant gains over the last three months, it remains on track to end the first half of the year around 20% lower from a year-to-date closing high reached on January 23.”

“South America’s largest country has recorded the second-highest number of coronavirus cases in the world, with over 1.3 million confirmed Covid-19 infections and 58,314 fatalities. Only the U.S. has recorded more cases of the coronavirus, with over 2.5 million cases so far,” the article added.

For short-term traders looking to play Brazil, there’s the Direxion Daily MSCI Brazil Bull 3X ETF (NYSEArca: BRZU) that seeks daily investment results equal to 200% of the performance of the MSCI Brazil 25/50 Index. The index is designed to measure the performance of the large- and mid-capitalization segments of the Brazilian equity market, covering approximately 85% of the free float-adjusted market capitalization of Brazilian issuers.

Broad-Based Brazilian ETF Exposure

A few ETFs to watch include the following:

  1. iShares MSCI Brazil Capped ETF (NYSEArca: EWZ): EWZ seeks to track the investment results of the MSCI Brazil 25/50 Index, which consists of stocks traded primarily on B3 (the largest Brazilian exchange). The index is a free float-adjusted market capitalization-weighted index with a capping methodology applied to issuer weights so that no single issuer of a component exceeds 25% of the underlying index weight, and all issuers with weight above 5% do not cumulatively exceed 50% of the underlying index weight.
  2. WisdomTree Brazilian Real Strategy ETF (NYSEArca: BZF): BZF seeks to achieve total returns reflective of both money market rates in Brazil available to foreign investors and changes in value of the Brazilian real relative to the U.S. dollar. The fund normally invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in investments whose combined performance is tied economically to Brazil. BZF generally will maintain a weighted average portfolio maturity of 90 days or less with respect to the money market securities in its portfolio.
  3. iShares MSCI Brazil Small-Cap ETF (NasdaqGM: EWZS): EWZS seeks to track the investment results of the MSCI Brazil Small Cap Index. EWZS will invest at least 90% of its assets in the component securities of the underlying index and in investments that have economic characteristics that are substantially identical to the component securities of the underlying index. The index itself is a free float-adjusted market capitalization-weighted index designed to measure the performance of equity securities in the bottom 14% by market capitalization of equity securities listed on stock exchanges in Brazil.

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