Brazil ETFs Fall As Economy Slows

ETF Trends

After the failed attempts at stimulating growth, Brazil’s economy expanded at below expectations, dragging down related country-specific exchange traded funds.

The iShares MSCI Brazil Index Fund (EWZ) plunged 3.6% Wednesday. The fund is down 2.9% year-to-date. The fund is trading below its 50- and 200-day moving averages.

Brazil’s GDP grew 1.9% in the first quarter year-over-year, compared to economists’ projections for a 2.38% expansion, reports Luciana Magalhaes for the Wall Street Journal. The economy expanded 0.6% in the first quarter over the fourth quarter.

“The weak Brazilian GDP and lower growth expectations in China are weighting on the Brazilian stocks,” Guido Chagas, a fund manager at Brazil’s money management firm Humaita Investimentos, said in the article. “To me, what is particularly worrisome is that families consumption didn’t go up in the first quarter in Brazil.”

Brazil’s government has increased government expenditure and enacted policies to stimulate consumption, which have kept unemployment rates low compared to other developed countries. [Stimulus Could Boost Brazil ETFs]

However, the stimulus measures failed to boost manufacturing, and consumers were scared off by rising inflation.

“The disappointment over the Brazilian economy’s performance weighed on the market,” Vladimir Caramaschi, chief economist with Crédit Agricole, said in a Reuters article.

Caramaschi believes that investors are anticipating low growth and high inflation, so they are reducing their exposure to the benchmark Bovespa Index. [Brazil Infrastructure ETF: Rio, We’ve Got A Problem]

Other Brazil ETFs include:

  • Market Vectors Brazil Small-Cap ETF (BRF) down 7.1% year-to-date
  • iShares MSCI Brazil Small Cap Index Fund (EWZS) down 6.2% year-to-date
  • Global X Brazil Mid Cap ETF (BRAZ) down 4.0% year-to-date
  • First Trust Brazil AlphaDEX Fund (FBZ) down 1.9% year-to-date

iShares MSCI Brazil Index Fund

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For more information on Brazil, visit our Brazil category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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