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Brazil ETFs Worst Performing Q2 International Market


Brazi’s Ibovespa index was the world’s worst performing benchmark over the second quarter as a sluggish economy, rising inflation and weaker domestic currency pummeled Brazilian stocks and related exchange traded funds.

The benchmark Ibovespa index plunged 16% in the second quarter, the largest decline among the world’s 20 largest benchmarks tracked by Bloomberg, reports Ney Hayashi for Bloomberg.

The iShares MSCI Brazil Index Fund (EWZ) declined 16.8% over the past three months, and the fund is down 19.3% year-to-date. EWZ reflects the performance of the MSCI Brazil Index.

Due to the ongoing speculation that the Fed would begin cutting back the flow of easy money, Brazilian stocks fell, with raw-material exporters taking the brunt of the damage, along with sinking commodities prices. For instance, the oil producer OGX Petroleo & Gas Participacoes SA plummeted 65% over the quarter.

“There are too many problems with Brazil’s economic policies, which is leading to higher inflation, weaker currency, slower growth,” Rogerio Freitas, a partner at hedge fund Teorica Investimentos, said in the article. “Any problem you can imagine, Brazil’s got it. Until there’s a sign that something is being done to tackle these issues, Brazilian assets — equities, currency, everything — will keep performing poorly.”

Hundreds of thousands took to the streets in anti-government protests that have quickly gained momentum as the economic condition deteriorated. [Brazil ETFs Lower on Protests]

“The protests makes things more complicated for the economy,” Marcio Cardoso, a partner at brokerage Titulo Corretora de Valores SA, said in the article. “At the very least, it erodes the people’s confidence, so we might see consumption falling. We also have to keep an eye on how the government will react.”

The Brazilian real is now down 9% against the U.S. dollar this quarter, despite the government’s move to repeal a transaction cost on foreign investments. The WisdomTree Brazillian Real Fund (BZF) is down 7.7% over the last three months. [WisdomTree: Brazil Repeals Financial Transaction Tax — What Could it Mean for Bond Investors?]

Consumer prices jumped 6.7% through mid-June year-over-year, which is now above the central bank’s 6.5% upper target range.

iShares MSCI Brazil Index Fund

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.