The Brazilian BOVESPA Stock Index is on pace for its best
one-week performance of 2014 as investors are taking notice of
the beaten down country.
A slow grind lower over the last two years has the index down
35 percent from its all-time high set in 2008.
There could be several factors behind the rally that range
from buying into an oversold and undervalued nation to the fact
the poll numbers are dropping for the current government. One of
the country's largest stocks, Petrobras (NYSE:
), which has been entangled in scandals and government issues for
years has increased by 11 percent in the last week.
The iShares MSCI Brazil Index ETF (NYSE:
) has gained over six percent in the last week and is breaking
out to a two-month high. The ETF is composed of 77 Brazilian
stocks with a heavy concentration on the largest companies in the
The financials makes up 28 percent, followed by consumer
staples at 17 percent and materials at 15 percent. A total of 10
percent of the ETF is invested in PBR and its preferred stock.
Over the last 12 months the stock is down 22.5 percent.
3 ETFs Poised To Bounce
The EG Shares Brazil Infrastructure ETF (NYSE:
) is up five percent this week, but remains lower by 26.5 percent
over the last year. The ETF is composed of 30 leading stocks in
sectors related to infrastructure. The utilities make up 48
percent of the portfolio, followed by basic materials at 18
percent and telecom at 17 percent.
The ETF only has $34 million in assets and charges an expense
ratio of 0.85 percent. One strategy to play the 2014 World Cup
soccer championship and the 2016 Summer Olympics, both in Brazil
was via BRXX. The reports were that the country would spend up to
$1 trillion on upgrading infrastructure. Due to political issues
and reports of facilities not on time, the ETF has struggled.
Also up five percent this week is the Market Vectors Brazil
Small Cap ETF (NYSE:
). The $151 million ETF is along for the ride this week, however
over the last year it has lagged its peers with a loss of 32.5
percent. While the small cap stocks have struggled the last year,
a rally in the country could see the underperformers lead a
potential rally. The key is for BRF to breakout above the $28
area that it has failed at twice in the last two months.
The sector-specific Global X Brazil Financials (NYSE:
) is up seven percent in the past week. The ETF is trading at the
best level since mid-January, but remains lower by 26.5 percent
over the last 12 months.
The biggest issue with the ETF is that is currently only has
$2 million in assets under management and is at risk to close if
it does not begin to attract more assets. With only 28 holdings
and a focus on a niche sector within an emerging market, the ETF
is considered high risk.
The decision an investor must make focuses on whether the
current rally in Brazilian stocks is short-term or the beginning
of something sustainable.
It is a little early to make that call, however within a week
or two the answer should be attainable and investors should be
ready to make a move if it appears the ETFs are starting a new
© 2014 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
Free Trading Education -
Check out the free events taking place on Marketfy
this week. Spaces are limited. Sign up today.