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Pre-World Cup Bounce for Brazil ETFs


It will not be surprising to see Latin American equities, including Brazilian stocks, get a little sluggish when the 2014 World Cup commences on Friday in Brazil.

That much is almost a guarantee. During the 2010 World Cup, Chile saw the sharpest drop in trading activity as volume plunged 99.5% when their national team was playing and 79% when other nations were playing while Brazil saw a fall of 74.5% in trading volume when their national team was playing and a 28.5% fall when other nations were playing,” according to Emerging Equity. [LatAm ETFs Could be Boring During World Cup]

However, investors cannot accuse the iShares MSCI Brazil Capped ETF (EWZ) of being lethargic before the World Cup. On Monday, the largest ETF tracking Latin America’s largest economy, surged 3% on volume that was 14.3% above the daily average.

That follows a 3.3% gain last Friday after another poll showed declining support for President Dilma Rousseff. [Rousseff's Pain, EWZ's Gain]

Importantly, EWZ is again showing noticeable relative strength against the S&P 500 following a multi-week retreat that was seen last month.

“Our first and foremost objective is to find out where the relative strength resides in all asset classes, we compare international and domestic stocks, bonds, currencies commodities and cash against each other to try to identify where the money is going,” according to Captain John Charts, which highlighted EWZ on Monday.

With a year-to-date gain of almost 14%, EWZ is the second-best performer of the four major single-country BRIC ETFs, trailing only the WisdomTree India Earnings Fund (EPI) .

To be precise, EWZ is up 13.7% this year, a performance that is an average of 450 basis points superior to the Vanguard FTSE Emerging Markets ETF (VWO) and the iShares MSCI Emerging Markets ETF (EEM) , the two largest emerging markets ETFs.

Since the start of the second quarter, EWZ has pulled in $156 million in new assets. Last year, the ETF was one of the 10 worst in terms of outflows with $3.6 billion in lost assets.

iShares MSCI Brazil Capped ETF


Chart Courtesy: Captain John Charts

ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of EEM.

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.