Over the weekend, another batch of solid Chinese economic data
was published confirming that the world's second-largest economy
may be on firmer footing than critics surmised a few months
Since June 24, the SPDR S&P China ETF (NYSE:
) is up 20.2 percent. In past years of emerging markets ETFs
performing well, what was good for China was good for Brazil.
As many investors know now, Brazil is highly dependent on
China as a purchaser of commodities produced in Latin America's
largest economy. The correlation between ETFs tracking these
economies can, in some cases, by intimate. For example, over the
past three years, GXC and the iShares MSCI Brazil Capped ETF
) have a correlation of 0.76,
according to State Street data
Although GXC and other large-cap China ETFs started rebounding
a couple of months ago, it has taken longer for EWZ to get in on
the act. Due to a plunging currency, tepid commodities demand,
economic growth that looks more like the U.S. or Japan and other
other factors, Brazilian equities entered a bear market earlier
this year. Now, that bear market is about to become a new bull
market, but Brazil-specific ETFs have a tendency to disappoint.
The good news is investors looking for Brazil exposure without
the commitment of a single-country ETF have plenty of
Getting 'Real' About Brazil ETFs
PowerShares BLDRS Emerging Markets 50 ADR Index Fund (NYSE:
) ADRE tracks the BNY Mellon Emerging Markets 50 ADR Index, which
is a cap-weighted collection of some of the most familiar
emerging markets stocks that are listed in the U.S. That means
ADRE's Brazilian holdings include infamous Petrobras (NYSE:
) and Vale (NYSE:
), though to be fair,
those stocks have been perking up in recent
Although ADRE is not a pure play on Brazil, the ETF's almost
30.7 weight to the country is enough to give investors exposure
to a rebound in Brazilian stocks without the commitment of a fund
like EWZ. Brazil is ADRE's largest country weight followed by
China at 24.8 percent and Mexico at 10 percent. ADRE, which has
$234.3 million in assets under management, is up 11.8 percent
since June 24.
WisdomTree Emerging Markets Dividend Growth Fund (NYSE:
) Brazil's dividend scene is a good news/bad news scenario. The
good news is the government requires some companies there to
payout 25 percent of profits in the form of dividends. The bad
news is that is not a guarantee there will not be dividend
"Markit Dividends expect an 8% fall in pay-outs to
shareholders to 60 billion Brazilian real this year," said the
in a report published in late July
"The decline in the aggregate change over 2012 was primarily
related to cuts from Petrobras, Vale and most Utility companies
(who were forced to cap their charges)," said Markit. The new
WisdomTree Emerging Markets Dividend Growth Fund, new as in
barely six weeks old, screens companies based on long-term
earnings expectations and return on assets and equity in an
effort to find the best future sources of dividend growth.
Brazil is the new ETF's largest country weight at 15.2 pecent,
but DGRE also allocates 20.3 percent of its combined weight to
Russia and China, two of the largest dividend payers in dollar
terms in the developing world.
For more on ETFs, click
Disclosure: Author is long EWZ.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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