Forgive the pun, but
tracking Brazil are turning out to be turkeys. At least in recent
days. The struggles for ETFs tracking Latin America's largest
economy continued on Wednesday as the Bovespa, Brazil's benchmark
index, slid half a percent.
Those declines were in part spurred by Centrais Eletricas
Brasileiras SA. Latin America's largest power generator fell to a
17-year low in Wednesday's session,
according to Bloomberg
Centrais Eletricas is not an integral component of the iShares
MSCI Brazil Index Fund (NYSE:
), the largest Brazil ETF. However, EWZ was off 1.1 percent in
late trading and has faltered 5.6 percent in the past month.
Centrais Eletricas accounts for less than 0.3 percent of EWZ's
EWZ's recent declines have been hastened by bearish comments
on Brazil by noted short-seller
Jim Chanos earlier this week
. Speaking at the Ira Sohn Conference in London, Chanos called
) and Vale (NYSE:
) two of his favorite shorts.
Shares of Petrobras, Brazil's state-run oil producer, have
plunged 5.7 percent in the past five trading days. Vale is off
1.4 percent over the same time. Various securities issued by the
two companies combine for about 26 percent of EWZ's weight.
The decline in shares of Centrais Eletricas is having an
adverse impact on another Brazil ETF and it is easy to see why.
The EGShares Brazil Infrastructure ETF (NYSE:
) is off nearly 1.1 percent in late trading. Centrais Electricas
accounts for less than three percent of BRXX's weight and the
stock is not even a top-10 holding in that ETF. However, BRXX
devotes almost 34 percent of its weight to utilities stocks.
BRXX has plunged 5.4 percent since November 8, when Benzinga
reported the ETF could be vulnerable to downside amid speculation
Brazil would not be able to meet the
needed to adequately host the 2014 World Cup and 2016 Summer
BRXX is now trading just 7.4 percent above its 52-week low and
a move below the psychologically important $20 area could spark a
return the 52-week low. As for EWZ, that ETF is continuing a
dangerous flirtation with the $50 area. The the $49-$50 area has
previously acted as support and a buying opportunity for EWZ
bulls, but the more the fund tests that price range, the better
the chances eager short-sellers will be able to eventually send
the ETF tumbling.
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