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Leveraged Brazil ETF Climbing Amid Fragile Political Stability

This article was originally published on ETFTrends.com.

Yesterday, the Direxion Daily MSCI Brazil Bull 3X ETF (BRZU) climbed by 6.26% as voters will head to the polls next week to decide on the country's next president, which will heavily impact the Brazilian markets and its economy on a going-forward basis. In the meantime, companies like Shell and Chevron are funneling capital into Brazil real estate to tap into the country's oil supply.

The Brazilian government is reportedly taking in an estimated $1.71 billion from the real estate deals, which will provide the country with the capital injection it needs ahead of an important election. Yet, there are some market analysts who feel that despite the victor in the election, investment in Brazil will continue, which should benefit investors or traders looking at BRZU.

"For many years, Brazil has retained a high level of direct foreign investment," said Roberto Jaguaribe , President of Apex-Brasil. "Over the last few years, it has improved dramatically in bringing in new investments in sectors, such as the oil sector where we have now all the major players in Brazil so I think this is going to continue independently of who wins the election."

BRZU has already climbed about 16% since Tuesday and 13% within the past month.

Presidential Election Looms

Brazil's presidential election on October 7 is a tight one that features five candidates with no clear-cut favorite--Jair Bolsonaro of the Social Liberal Party, Ciro Gomes of the Democratic Labor Party, Geraldo Alckmin of the Brazilian Social Democratic Party and Fernando Haddad of the Workers' Party.

"The outcome will be very important from a macro perspective because it will determine the policy path moving forward," said Alberto Ramos, head of Latin American economics at Goldman Sachs. "The market would like to see a market friendly candidate win, but that's more of a dream than reality."

Related: Ray Dalio: ‘Two Years Left’ in Current Market Cycle

Economy in Slow Recovery

The economy will certainly be on the minds of voters next week as the Brazilian economy has been slogging its way to a recovery after it experienced its worst recession to date as unemployment levels remain high with double-digit figures and the country is drowning in public debt--equal to 74% of GDP.

While the annual GDP growth has posted positive gains as of late, it's still not at a level where economists are optimistic about the future growth prospects. The idea situation to address Brazil's current financial woes is to elect a president who is market-friendly to help stymie the issues by effecting policies that favor economic expansion and growth.

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