We have lamented on several occasions in 2013 the flailing performance of Brazil, as measured by EWZ (iShares MSCI Brazil, Expense Ratio 0.60%) and how it has created a drag on broader Emerging Markets indices where Brazil is weighed in as a notable component such as the MSCI EM Index (Brazil has an 8.52% weighting currently).
If you haven’t been paying attention, in the past several trading sessions Brazilian equities have been narrowing the gap, with EWZ rallying back near its 200 day moving average and trading at its highest levels since early June.
Trading volume in EWZ yesterday was gigantic (>30 million shares versus ADV of 18.3 million shares) and the October 50 calls traded actively in size.
One of the top equity components of the underlying index, VALE, was also rather active in terms of its options, specifically in call contracts.
EWZ is a true ETF veteran, having debuted back in 2000 and currently with $6 billion in assets under management, dwarfing the next largest fund with a Brazilian equity focus in the landscape, which is BRF (Market Vectors Brazil Small Cap, Expense Ratio 0.59%) with $256 million in AUM.
EWZ is market cap weighted, and reasonably balanced across mega/large/mid cap names. Top holdings are familiar companies including Itau Unibanco Holding S.A. (7.50%), Petroleo Brasileiro SA (known as Petrobras), 7.25%, and Banco Bradesco SA (6.16%).
Other ETF notables that are in play here amid the explosive rally in Brazilian equities after a period of pronounced underperformance include BRXX (EG Shares Brazil Infrastructure, Expense Ratio 0.85%), EWZS (iShares MSCI Brazil Small Cap, Expense Ratio 0.60%), BRAQ (Global X Brazil Consumer, Expense Ratio 0.77%), BZQ (ProShares UltraShort MSCI Brazil, Expense Ratio 0.95%), UBR (ProShares Ultra MSCI Brazil, Expense Ratio 0.95%), BRZU (Direxion Daily Brazil Bull 3X Shares, Expense Ratio 0.95%), and BRZS (Direxion Daily Brazil Bear 3X Shares, Expense Ratio 0.95%) to name a few.
We haven’t seen any notable asset flows in EWZ in terms of creation and redemption in recent days, but it will be extremely interesting to see if given the recent sea change in the Brazilian equity market, that EWZ can reverse its 2013 outflow trend (fund has lost a significant $2.3 billion year to date via redemption flows).
iShares MSCI Brazil
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- Expense Ratio