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Falling Investment Cripples Brazil ETFs, Economy


Brazil exchange traded funds have been stuck in a rut as the Brazilian economy, one pillar of the BRIC emerging markets, stumbled over the third quarter, despite the heavy helping hand from the government.

The iShares MSCI Brazil Index Fund (EWZ) lost 1.6% over the past three months and is down 7.7% year-to-date.

Brazil’s economy only expanded 0.6% in the third quarter, which was below Bloomberg’s 1.2% median estimate of surveyed economists, after the country’s stimulus measures failed to support investments for the fifth straight period, reports David Biller for Bloomberg.

“Today’s report was awful,” Neil Shearing, chief emerging markets economist for Capital Economics Ltd., said in the article. “The really disappointing thing about today’s data is that despite all the policy stimulus over the past year, it’s clear the economy is still struggling to get going.”

The benchmark Bovespa stock index declined as much as 1.7% during trading.

President Dilma Rousseff has cut rates to record lows, diminished taxes and increased spending to help bolster the economy.

“This is very welcome, though unfortunately what brought Brazil to this state of affairs of weaker investment is something that built up over years,” Andre Loes, chief Latin America economist at HSBC Bank Brasil SA, said in the article. “It’s going to take time for these measures to show results.”

On an annualized basis, Brazil’s GDP rose 2.4% in the third quarter, or well below the 4.7% forecast, making Brazil the worst performer among the BRIC group, which includes Russia, India and China. In comparison, the U.S. added 2.7% in the third quarter. [Can Brazil ETF Catch Up to the BRICs?]

Finance Minister Guido Mantega expects the economy to expand 1% in the fourth quarter.

Other Brazil ETFs include:

  • First Trust Brazil AlphaDEX Fund (FBZ)
  • Global X Brazil Mid Cap ETF (BRAZ)
  • Market Vectors Brazil Small-Cap ETF (BRF)
  • MSCI Brazil Small Cap Index Fund (EWZS)

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.