Brazil ETFs on the Rise With Real

Joel Anderson |

Monday morning saw a boost for those ETFs tracking Brazilian companies as the original BRIC country’s economy continued to show gains. Brazil’s currency, the real, has been suffering significant inflationary pressures in 2013, losing some 17 percent against the dollar earlier this year. However, the decision by the U.S. Federal Reserve to hold off on the tapering of quantitative easing combined with an August 22 move by Brazil’s central bank to intervene with $60 billion in cash and liquidity, meant to stabilize the real and provide more liquidity, appear to have worked in tandem to help return strength to the real.

And the returning optimism in the currency appears to be carrying equities with it, with the major Brazil ETFs on the rise. The iShares MSCI Brazil Index Fund ($EWZ) spiked over 1 percent, the Market Vectors Brazil Small Cap ETF ($BRF) gained over 0.85 percent, the iShares Brazil Small Cap Index ETF (EWZS) jumped almost 1.25 percent, and the Emerging Global Shares Brazil Infrastructure ETF ($BRXX) also picked up almost 1.25 percent.

August Intervention Appears to be Working

The move by the country’s central bank is looking as though it was effective. On August 22, the country announced a program to bolster its currency that included weekly $1 billion dollar loans each Friday and $500 million currency swaps on Mondays, Tuesdays, Wednesdays, and Thursdays through the end of December. The results have been solid, with the real having its best month in two years during September, climbing 7.6 percent against the dollar. The resulting gain for equities were clear, with MSCI Brazil Index Fund up over 20 percent since the announcement of the policy.

Gains Despite Bankruptcy for OGX

Today’s gains for Brazilian equities come soon after they took a major hit when oil giant OGX Petoleo E ADR (OGXPY) filed for bankruptcy on Wednesday, prompting a 26 percent slide in the company’s stock. Losses have continued with the company down almost 45 percent since the start of last week.

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Companies

Symbol Name Price Change % Volume
IWKCF Iwaki & Co Ltd Ord n/a n/a n/a 0

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