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Brazil ETFs Surge as Market Friendly Presidential Candidate Gains Support

This article was originally published on ETFTrends.com.

Brazil ETFs were among the best performers Tuesday after a poll revealed far-right presidential candidate, Jair Bolsonaro, was gaining ground among voters.

The iShares MSCI Brazil Capped ETF (EWZ) rose 5.8% Tuesday and broke back above its short-term resistance at the 50-day simple moving average.

Brazilian markets jumped after a poll published late Monday revealed Bolsonaro's support rising to 31%, or a 10 point lead ahead of Fernando Haddad, the candidate of the leftwing PT, the Financial Times reports.

“This is clearly favorable for Bolsonaro and markets have reacted positively,” Alberto Ramos of Goldman Sachs told the Financial Times.

The support may also have been partially attributed to further revelations of the PT’s involvement in corruption after an investigating judge announced testimony indicating former president Luiz Inácio Lula da Silva was complicit in illegal payments to the PT from Petrobras, the state-owned oil company.

Revival of Further Brazil Reforms

The markets have supported Bolsonaro partly due to the presidential candidate's appointment of Paulo Guedes, a University of Chicago-trained financier, as his “one-stop shop” on economic policy. Investors believe Guedes is the best hope of a revival of further reforms, which have stalled in recent years.

Ramos argued that Bolsonaro appears more market friendly as compared to Haddad given his economic platform.

Now "the fear is that Haddad and the Workers Party will return to power and to the policies that took so many years to digest," said Ramos, according to CNBC.

Related: Leveraged Brazil ETF Climbing Amid Fragile Political Stability

Bolsonaro's economic advisors "seem to have a better assessment of the seriousness of the fiscal challenges besetting the Brazilian economy," hence why the market is cheering his progress in the polls, Ramos added.

The election is widely expected to head toward a run-off on October 28 as no single candidate are projected to win a majority vote in the first round on Sunday.

For more information on the Brazilian markets, visit our Brazil category.

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