Among the exchange traded funds tracking Latin America's
largest economy, the iShares MSCI Brazil Capped Index Fund (NYSE:
) reigns supreme as the biggest with nearly $7.9 billion in
assets under management and the most heavily traded with average
daily volume of almost 11.7 million shares.
Recently, EWZ has also been an ETF that cannot seem to get out
of its own way. Rather, myriad negative headlines pertaining to
some of EWZ's marquee holdings are the real obstacles to the
fund's ability to snap out of its funk.
), Brazil's state-run oil giant and nearly 12 percent of EWZ's
weight, is a familiar drag on EWZ. However, earlier this month,
there were signs
Petrobras may be poised to finally start helping
instead of hindering it.
In early March, shares of Petrobras announced it raised diesel
prices in Brazil five percent. That followed a January increase
on gas prices of 6.6 percent and diesel increase of 5.4
Fast-forward to this week and Petrobras was out telling
investors it plans to keep its already heavily criticized
five-year $236.5 billion spending plan in place.
While another dilutive stock sale - the company's $70 billion
2010 share sale is the biggest stock offer ever by a U.S.-listed
company - does not appear likely, Petrobras does plan to sell $12
billion in debt annually to finance its exploration
Additionally, the company lowered its asset sales target to
$9.9 billion by 2017 from $15 billion,
Shares of Petrobras fell 3.7 this week, but the stock was far
from the only offender in EWZ. Vale (NYSE:
), the world's largest iron ore producer and 10 percent of EWZ's
weight, is off more than five percent over the past month.
Indeed, the stock finished higher this week, but the company
is involved in an ongoing
rift with the Argentine government
The government there is seeking to block Vale from dismantling
its Rio Colorado potash mine,
Dow Jones reported
Making matters worse for Vale and its rivals, Morgan Stanley
said earlier this month that spot iron ore prices probably peaked
in February at $159 a metric ton and could average $133 per
metric ton for the rest of this year.
Then on Wednesday Moody's Investors Service pared its ratings
on the National Development Bank, or BNDES, and the Caixa
Economica Federal, two state-run Brazilian banks.
Those names are not EWZ constituents, but it should be noted
that in 2012, Brazilian banks saw their worst profit margins in
years due to lower interest rates and prodding from the
government to pare fees. Financial services stocks account for
27.4 percent of EWZ's weight.
Overall, EWZ lost 2.3 percent just this week and is now
clinging to its 200-day moving average by mere pennies. Without
the benefit of some near-term upside, EWZ could test support at
$52 and if the ETF does not hold there, the next stopping point
is likely around $48.
For more on Brazil, click
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
Profit with More New & Research
. Gain access to a streaming platform with all the information
you need to invest better today.
Click here to start your 14 Day Trial of Benzinga