There has been a good amount of coverage in the past several months of the flagging performance of the Brazilian equity market, and the benchmark ETF EWZ (iShares MSCI Brazil, Expense Ratio 0.60%) that tracks this market has traded rather actively in its own right as well as in its listed options.
Yesterday we saw buyers of February 39 puts in EWZ, which are out of the money given EWZ trading around the $42 level at the time, but still a realistic strike given the volatility and general selling pressure we have been accustomed to seeing in this particular product. EWZ has its largest sector allocations to Consumer Staples (16.83%) and Financial Services (16.78%) and top holdings are companies that are rather well known thanks to their multi-national reach like Itau Unibanco Holding S.A. (7.34%), Ambev (6.81%) and Petrobras (6.61%).
EWZ is not only the largest ETF that tracks the Brazilian equity market but it is the largest in the greater Latin America Equity category as well, with $4.175 billion in assets under management. It is worth noting that staggering performance in Brazil in comparison to broad EM proxies like the MSCI EM Index as well as other EM single country based ETFs has certainly caused some to fold their tents and sell out of positions in the fund (EWZ has seen more than $3.5 billion leave the fund via redemptions in the trailing one year period amid concerns of further weakening in the Brazilian equity market apparently).
Brazil of course carries an 8.36% weighting in the MSCI EM Index, ranked as the fourth largest single country member behind China, South Korea, and Taiwan.
Other notable funds in the Brazil Equity category that we are looking at today are the substantially smaller BRF (Market Vectors Brazil Small Cap, Expense Ratio 0.59%), BRXX (EGShares Brazil Infrastructure, Expense Ratio 0.85%), and EWZS (iShares MSCI Brazil Small Cap, Expense Ratio 0.60%).
BRF has not been spared in terms of investors seeming to leave the fund via redemptions in the past year ($-259 million) although fund flows have been rather flat in both BRXX and EWZS during this time period. For those looking to aggressively trade the country directionally on a short term basis, several leveraged ETFs exist although they may currently fly under most radars.
These products are 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 1.08%), and BRZS (Direxion Daily Brazil Bear 3X Shares, Expense Ratio 1.10%), the largest of which is BZQ with only $15.5 million in AUM currently.
iShares MSCI Brazil Capped ETF
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- Expense Ratio