EWZ: Why It Could Be A Good Time To Invest In Brazil

seekingalpha07-15

To invest in the Brazilian stock market, I chose the EWZ ETF because it is more liquid, even though it has fewer holdings and is more expensive than its peers.The economic prospects for Brazil are ...

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A positive growth rate is important to me because, in emerging markets, the population is the true wealth of a country, especially in Brazil where the economy revolves","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4588":"碎股","FDN":"First Trust Dow Jones Internet I","EWZ":"巴西ETF-iShares MSCI","BK4585":"ETF&股票定投概念","BK4550":"红杉资本持仓","CPI":"IQ Real Return ETF"},"translate_title":"EWZ：为什么现在是投资巴西的好时机","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"CPI":1,"EWZ":1,"FDN":0.9},"content_text":"To invest in the Brazilian stock market, I chose the EWZ ETF because it is more liquid, even though it has fewer holdings and is more expensive than its peers.The economic prospects for Brazil are positive, and the country's stock market performance significantly lags behind its GDP growth.The lowering of Fed rates can stimulate the growth of commodity prices and emerging market stocks, including Brazil.From a technical analysis perspective, we have reached a good moment to start a DCA plan.   kutaytanirIntroduction Like some of you, I’m the kind of investor who loves to keep specific thematic or geographical ETFs in my portfolio. For emerging markets, for example, I don't have a single exposure to a generic \"emerging market ETF\"; rather, I invest in individual geographic ETFs. Similarly, I prefer to exclude macro areas. For instance, in the Asian market (emerging segment), I have one ETF for the China segment and another ETF for India. The same applies to Latin America: I have ETFs for Brazil and Mexico (at the moment, I'm not a great fan of Chile and Peru). For investing in Brazil, I chose the iShares option, even though it’s more expensive than other ETFs, the iShares MSCI Brazil ETF (NYSEARCA:EWZ). I don’t focus on the cost; rather, I prefer to concentrate on long-term performance. Right now, I truly believe that Brazil has alpha potential—not the kind that provides short-term investor satisfaction, but rather, I think this is a great time to start a Dollar-Cost Averaging (DCA) plan. Firstly, because the economic prospects in Brazil are promising; secondly, for statistical reasons. EWZ, do you really know what you’re investing in? When I started learning about emerging markets back in 2010, I discovered a world vastly different from what I had imagined. I thought I would find very small capitalizations with extremely high growth rates and a strong focus on technology. The real world of emerging markets, like China, is different; emerging economies are actually based on import-export. As you may know, emerging markets follow the commodities market trends and the foreign exchange (forex) market. In my opinion, you could find a great explanation of this consideration here. Comparing EWZ to its peers, we can easily see that the holdings are about the same. Also, the ETF price trend follows a similarly composed benchmark. It’s curious to see that FLBR has around the same performance as EWZ despite FLBR’s expense ratio being really low (0.19%). As I always say, it's better to look at the performance than the cost. That said, I prefer EWZ because it is much more liquid, even if it is less diversified. Data by YCharts What drives the growth of Brazilian company stocks? When I analyze geographic ETFs, I always want to see the population growth rate of the country where I plan to invest. A positive growth rate is important to me because, in emerging markets, the population is the true wealth of a country, especially in Brazil where the economy revolves around raw materials. The population growth rate of Brazil is positive, around 0.5%; that's good, especially considering that it is the seventh most populated country in the world. Countries in the world by population (2024) (www.worldometers.info)Secondly, I like to study their economic history, particularly the reasons behind expansions and contractions. Over the past 20 years, Brazil's GDP growth rate has shown significant variability. In 2004, Brazil's GDP growth rate was over 5%, around 5.7%, but the apex was reached in 2007, when the GDP grew by 6.1%. The reason behind this expansion was that Brazil benefited from increased global demand for commodities such as soybeans, iron ore, and oil. Of course, there was also a favorable political and monetary context. In 2009, the global recession affected the productivity of all countries, including Brazil. The recession was brief, and in 2010 the Brazilian GDP growth rate reached 7.5%. However, the economy of Brazil fell into recession again in 2015 and 2016. The reason was a drastic drop in commodity prices. \"Coincidentally,\" during this period, poor political and monetary decisions were made. Economic outlook According to OECD projections, Brazil's GDP is expected to grow by 1.2% in 2024 and 1.5% in 2025. The IMF (International Monetary Fund) also forecasts GDP growth of 2.2% for 2024. This data is further confirmed by Brazil's Ministry of Finance, which states that the projected growth rate for 2024 is 2.2%, increasing to 2.8% in 2025. This Deloitte paper could be useful for all readers to understand the Brazilian economic prospects. The unemployment rate is declining, reaching 7.6%, and inflation stood at 3.9% in March, lower than the 4.5% in February. According to the Deloitte paper, economic growth could come from private consumption, driven by the services segment. At the same time, exports are expected to remain stable despite global uncertainties and fluctuations in commodity prices, partly due to a possible recovery in the Chinese market. To study commodity projections, these content from the World Bank could be really interesting. Why it's a good time for emerging markets In the last week, we all saw how the increased expectations of falling interest rates could impact the global market. It's a basic macroeconomic concept: as the cost of a dollar goes down, I move to another country. When the Bureau of Labor Statistics (BLS) shared a lower Consumer Price Index (CPI), the probability of a decrease in interest rates at the September FOMC meeting grew, as we can easily see by watching the CME FedWatch Tool. While the DXY (Dollar Index) collapsed, along with U.S. stock prices, commodity prices went up, as did emerging market stock prices. Do you believe in a soft landing? If so, in my opinion, you believe in an increase in emerging market company revenue. DXY, EWZ, BLOOMBERG COMMODITY INDEX FUTURES (TRADINGVIEW)Analysis of EWZ Chart (Here’s Why I Think It’s Worth Starting a DCA) You might be thinking: \"Pfft, technical analysis? How can you do technical analysis on an ETF?\" Using technical indicators sometimes helps analysts navigate the market. Recently, my alert system gave me an important indication: \"RSI under 50 and touching its moving average on a 1W timeframe.\" Statistically, this is a great indication: from now, it becomes cheaper to invest in Brazil. For this reason, I think it's a good moment to initiate a DCA plan for anyone who would like to invest in this country. EWZ ETF (TRADINGVIEW) What is the biggest risk? The political one Before introducing the risks of investing in EWZ, I would like to make a personal consideration. In my honest opinion, saying that \"emerging market economies are too influenced by political and monetary decisions\" is too reductive. Often, we forget that these kinds of decisions are the consequences of an economic status. So, why do I want to underline this? Because everyone knows the current geopolitical issues. Lula's stance on international issues such as the Russian invasion of Ukraine and the conflict between Israel and Gaza has created friction with the West. At the same time, the war could negatively impact the market, leading to increased price volatility, especially for energy commodities. These circumstances could generate new political tensions ahead of the municipal elections of 2026, leading to a general sell-off in the stock market. I know, it’s scary, but in my opinion, that's not the crucial point. Additionally, an expansion of conflicts would generate instability in the entire stock market, so it is not a risk specific only to Brazil. Conclusion  In my opinion, it is a good moment to invest in EWZ. First of all, the macroeconomic outlook favors emerging markets; Brazil, in particular, presents great economic prospects. From a technical point of view, this could be a good time to start a DCA plan. Additionally, for this reason, I believe there is an alpha to capture in EWZ.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2451611048"}