One month into the new year and the iShares MSCI Brazil Index
) has been unable to shake its laggard status established in
Last year, the $9.27 billion EWZ was the worst performer among
the four major
tracking the BRIC nations. A late year rally helped EWZ close
2012 in the green but a gain about half a percent was not even
close to the 15 percent offered by the Market Vectors Russia ETF
), the next-closest BRIC ETF in terms of performance.
EWZ is up to its old tricks again as the ETF headed into the
start of trading today with a year-to-date loss of about 0.7
percent. The iShares FTSE China 25 Index Fund (NYSE:
) and RSX are down on the year, though not as much as EWZ, and
the WisdomTree India Earnings ETF (NYSE:
) has notched a modest year-to-date gain.
Perhaps highlighting the lack of faith some investors have in
EWZ, the ETF is off 0.35 percent Thursday and that is after
Brazil's government statistics agency IBGE said the unemployment
rate in Latin America's largest economy fell to 4.6 percent in
December from 4.9 percent in November. That missed estimates of
4.4 percent, but a 4.6 jobless rate is still stellar in the
developed and developing worlds.
The U.S. unemployment rate is 7.8 percent. Egypt's is around
12 percent. Both Spain and South Africa have jobless rates north
of 20 percent.
As EWZ has struggled this year, a
familiar culprit has emerged as the reason
. That culprit is Petrobras (NYSE:
), Brazil's state-run oil company.
Including Thursday's loss of about two percent, Petrobras is
continuing a disturbing trend of its own. That being wearing the
dubious title of one of the world's worst oil equities. Shares of
Petrobras trading in New York are down 7.3 percent year-to-date,
including Thursday's. Trading around $18.20 at the time of this
writing, Petrobras is less than a $1 above its 52-week low at
That sad performance really stands out among integrated oil
companies because Colombia's Ecopetrol (NYSE:
), that country's state-controlled oil firm, BP (NYSE:
), Exxon Mobil (NYSE:
) and Chevron (NYSE:
) have all delivered solid-year to date performances.
While Petrobras's market value has dwindled, so has its weight
in EWZ. In early November, the two Petrobras securities found in
combined for over 16 percent of the ETF's
. That figure was down to 13 percent as of Wednesday, but that
does not change the fact that Petrobras is still EWZ's largest
Petrobras has come under pressure this week after the company
announced it will raise gasoline and diesel prices by 6.6 and 5.4
percent, respectively. Analysts were hoping for higher increases.
Being controlled by the Brazilian government means Petrobras does
not have the freedom to raise prices in an effort to take
advantage of rising oil futures. Brazil has strict fuel price
controls aimed at controlling inflation there.
That may be good for Brazilian drivers, but those price
forced Petrobras into reporting its first
quarterly loss in 13 years
in the second quarter of 2012, Bloomberg reported. Now Petrobras
has a market cap of just under $119 billion, meaning it is about
$11 billion smaller than Ecopetrol based on that metric.
Bottom line: Petrobras, and by virtue, EWZ are again reminding
ETF investors that the biggest fund is not always the best way of
accessing Brazil. For example, the Market Vectors Brazil
Small-Cap ETF (NYSE:
) has posted a modest year-to-date gain and as small-cap ETF, BRF
has no exposure to Petrobras.
Those willing to take a look at a smaller, thinly traded ETF
can consider the First Trust Brazil AlphaDEX Fund (NYSE:
). FBZ is up about 1.5 percent year-to-date and allocates just
1.86 percent of its weight to Petrobras.
For more on ETFs, click
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
Gain access to more investing ideas, tools & education.
Get Started on Marketfy, the first ever curated
& verified Marketplace for everything trading.