Loading…
Loading…
EWZS caught the first wave of Brazil's rally, but foreign money mostly parked in Petrobras, Vale, and the big banks. Selic cuts looked bullish on paper, while the five-year yield quietly moved the other way and kept the cost of capital painfully high. At less than 8x earnings, EWZS looks dirt cheap—until Brazil's 14% fixed-income alternative walks into the room.
South Korea and Taiwan are grabbing the majority of financial news headlines when it comes to international exposure, but a peek inside Latin America reveals potential opportunities. Brazil, in particular, could be offering investors ample value in both equities and bonds beyond those aforementioned countries already benefiting from the artificial intelligence (AI) buildout.
Brazil's ethanol and sugar producers on Thursday despaired at the imposition of new 25% tariffs on Brazilian goods by the U.S. government, lamenting a rollback in cooperation between the two countries.
Brazil's Agriculture Ministry has adjusted export controls for meat and derivatives to meet European Union antimicrobial usage requirements, aiming to prevent a suspension of shipments to the bloc starting in September.
Brazil expects to raise 50 billion reais ($9.92 billion) in what will be the most ambitious auction yet under its Eco Invest program, focused on developing advanced sustainable technologies in strategic sectors, Rogerio Ceron, executive secretary of the Finance Ministry, told Reuters.
I reiterate my buy rating on the iShares MSCI Brazil Small-Cap ETF, citing a compelling cyclical opportunity. EWZS trades at 7.5x earnings, with a historical re-rating to 9x offering a potential 20% upside. Falling Brazilian interest rates provide a significant tailwind for leveraged small caps, improving financial results and economic conditions.
Brazil's benchmark Ibovespa fell about 1% on Friday, slipping below the 179,000 mark as investors recalibrated expectations in response to a more cautious tone from central banks and escalating geopolitical tensions in the Middle East. The decline reflects a broader reassessment of monetary policy trajectories, particularly as rising energy costs revive concerns about inflation.
Strong foreign capital inflows into Brazil, supported by one of the highest real interest rate differentials globally, have been a key driver of the recent rally in Brazilian equities. As monetary policy begins to shift toward easing, domestically exposed small caps could become the next leg of the Brazil trade. EWZS provides diversified exposure to Brazilian small-caps that act as direct proxies for the domestic economy, unlike Brazil's commodity-heavy large caps.