BRF: Brazilian Equities Still Have Room To Run

seekingalpha08-03

The VanEck Brazil Small-Cap ETF is a unique way to gain access to Brazil's stock market.2023 was a strong year for Brazil's stock market, but stocks have pulled back sharply in 2024 due to political ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2456466552?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1370008167/image_1370008167.jpg","is_english":true,"pubTime":"2024-08-03 18:25","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2456466552","market":"hk","top_or_hot":-1,"title":"BRF: Brazilian Equities Still Have Room To Run","media":"seekingalpha","content":"<div>\n<p>The VanEck Brazil Small-Cap ETF is a unique way to gain access to Brazil's stock market.2023 was a strong year for Brazil's stock market, but stocks have pulled back sharply in 2024 due to political ...</p>\n\n<a href=\"https://seekingalpha.com/article/4710061-brf-brazilian-equities-still-have-room-to-run\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>BRF: Brazilian Equities Still Have Room To Run</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nBRF: Brazilian Equities Still Have Room To Run\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-03 18:25 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4710061-brf-brazilian-equities-still-have-room-to-run><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The VanEck Brazil Small-Cap ETF is a unique way to gain access to Brazil's stock market.2023 was a strong year for Brazil's stock market, but stocks have pulled back sharply in 2024 due to political ...</p>\n\n<a href=\"https://seekingalpha.com/article/4710061-brf-brazilian-equities-still-have-room-to-run\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0543330566.HKD","symbol_name":"TEMPLETON BRIC \"A\" (HKD) ACC","start_time":0,"source_url":"https://seekingalpha.com/article/4710061-brf-brazilian-equities-still-have-room-to-run","article_id":"2456466552","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1370008167/image_1370008167.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2456466552","pubTimestamp":1722680718,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"The VanEck Brazil Small-Cap ETF is a unique way to gain access to Brazil's stock market.2023 was a strong year for Brazil's stock market, but stocks have pulled back sharply in 2024 due to political a","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0543330566.HKD":"TEMPLETON BRIC \"A\" (HKD) ACC","BK4550":"红杉资本持仓","BK4588":"碎股","LU0050427557.USD":"富达拉丁美洲基金","LU0330918003.SGD":"Blackrock World Mining A2 SGD-H","LU0228659784.USD":"施罗德金砖四国基金","EWZ":"巴西ETF-iShares MSCI","LU0072463663.USD":"Blackrock Latin American A2 USD","BRF":"巴西小盘股ETF-VanEck Vectors","LU0256859116.SGD":"施罗德拉丁美洲A Acc SGD","LU0651947912.USD":"BGF EMERGING MARKETS EQUITY INCOME \"A5G\" (USD) INC","BK4207":"综合性银行","LU0456842615.SGD":"JPMorgan Funds - Emerging Markets Equity A (acc) SGD","LU0788109048.HKD":"BGF LATIN AMERICAN \"A2\" (HKDHGD) ACC","LU1515016050.SGD":"Blackrock Emerging Markets Equity Income A6 SGD-H","LU0320763518.SGD":"FTIF - Templeton Latin America A Acc SGD","LU1051769294.HKD":"BGF EMERGING MARKETS EQUITY INCOME \"A6\"(HKDHDG) INC","LU0128526570.USD":"TEMPLETON LATIN AMERICA \"A\" ACC","VALE":"淡水河谷","FDN":"First Trust Dow Jones Internet I","LU0229945570.USD":"TEMPLETON BRIC \"A\" (USD) ACC","BK4006":"钢铁","LU0651946864.USD":"贝莱德新兴市场股票收益A2","LU0572108347.SGD":"Blackrock Latin American A2 SGD-H","PBR":"巴西石油公司","IE00B1B80R65.USD":"柏瑞拉丁美洲股票A","BK4548":"巴美列捷福持仓","LU1051768304.USD":"贝莱德新兴市场股票收益A6","LU0029865408.USD":"TEMPLETON LATIN AMERICA \"A\" INC","LU1023059493.AUD":"Blackrock World Mining A2 AUD-H","LU0449509016.USD":"HSBC GIF BRIC EQUITY \"AC\" (USD) ACC","LU0214875030.USD":"HSBC GIF BRIC EQUITY \"M2C\" (USD) ACC","LU0265267285.USD":"BNP PARIBAS BRAZIL EQUITY \"C\" (USD) INC","BK4201":"综合性石油与天然气企业","LU0086394185.USD":"SCHRODER ISF LATIN AMERICAN \"A\" (USD) INC AV","LU0532187761.SGD":"JPMorgan Funds - Brazil Equity A (acc) SGD","IE00B0JY6N72.USD":"PINEBRIDGE GLOBAL EMERGING MARKETS FOCUS EQUITY \"A\" (USD) ACC","BK4533":"AQR资本管理(全球第二大对冲基金)","BK4585":"ETF&股票定投概念","LU0106259046.USD":"施罗德拉丁美洲基金","LU0075056555.USD":"贝莱德世界矿业基金A2","ITUB":"艾涛巴西联合银行","LU0265266980.USD":"法巴巴西股票基金","BK4566":"资本集团"},"translate_title":"BRF：巴西股市仍有上涨空间","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"VALE":1,"PBR":1,"BRF":1,"EWZ":1,"ITUB":1,"FDN":0.9},"content_text":"The VanEck Brazil Small-Cap ETF is a unique way to gain access to Brazil's stock market.2023 was a strong year for Brazil's stock market, but stocks have pulled back sharply in 2024 due to political and economic concerns.Despite a bumpy 2024, the long-term outlook for Brazil's economy remains favorable, with potential for rate cuts and stronger growth in 2025.   Pollyana Ventura/E+ via Getty Images Opportunity Overview 2023 was a stellar year for Brazil's stock market, as stronger growth in the economy led the market to rally by circa 22% while emerging markets had flat performance. Brazil, like many emerging markets, has been through significant economic challenges, but appears like it could outperform in 2024 and 2025. Data by YCharts Equities in Brazil have pulled back sharply since the beginning of 2024, bringing them back to the early 2023 lows, due to fears over political stability and economic growth prospects. While 2024 may be a bit bumpy for Brazil's economy, the long-term outlook for Brazil's economy still looks favorable, as inflation is down, and the Central Bank may be able to cut rates later this year. Much of the selloff has been the result of slower growth this year, which is the delayed impact of previous rate hikes, but growth should be able to bounce back in 2025. Most importantly, equities in Brazil trade at very compelling valuation, relative to both emerging markets and regional peers. This looks like an excellent time to take advantage of the circa 20% pullback in Brazilian equities this year, which is also a product of broader trends in emerging markets. Inflation Improvements Leaves Room for Rate Cuts Brazil’s inflation rate has improved substantially, after peaking at over 11% in 2022, and has remained below 5% since October 2023. However, inflation came in slightly higher than expected last month, which may make it difficult for the Central Bank to cut rates in the short term.  Inflation   Trading Economics Brazil’s Central Bank aggressively hiked rates after inflation reached a multi-decade high in 2022 and could gradually cut rates as inflation continues to improve. It hiked rates to 13.75% by the end of 2022 and has since only cut rates to 10.5%. Lower interest rates could help support economic growth in 2025, which is crucial given that growth in 2024 has been a bit slower due to these policies.  Unemployment Rate   Trading Economics The country’s unemployment rate declined from 14.7% in April 2021 to 6.9% this year. Lower rates and a stronger labor market could help boost consumer sentiment and help support economic growth will likely be slower this year due to previous monetary tightening. Agriculture And Oil: Two Catalysts One intriguing fact about Brazil is that it provides exposure to the global agriculture industry, as around half of the country's exports are agricultural exports. This makes Brazil one of the most clear-cut indirect plays on agriculture and commodities. As growth in China began to bounce back, this could support Brazil’s exports in subsequent years. China is Brazil's top buyer of key products like soybeans, meat, and sugar. Moreover, increased trade with the United States has helped offset cyclical swings in China.   Deloitte In the long run, Brazil's agriculture industry has a favorable outlook and is positioned to recover from disruptions in the early 2020s. It already controls around half of the world's soybean market and is also one of the world's largest corn exporters. Another potential long-term catalyst, that is relatively overlooked, is Brazil's ability to be a leading oil producer. A recent note from McKinsey noted that Brazil may be able to boost its oil production by 70% by 2035. Brazil was already ranked 9th in terms of production in 2022 and could be poised to gradually climb the ranks in the coming years. Future Outlook Brazil should have moderate growth in 2024, although it will be slower relative to 2023 due to previous monetary tightening. OECD projects that Brazil’s economy will grow by 1.9% in 2024 and 2.1% in 2025. A stronger labor market and increased consumer confidence, driven by lower inflation, should help growth pick up further in 2025.   OECD One of the biggest risks in Brazil at the moment is the country’s fiscal balance, as the fiscal deficit was equivalent to 2.1% of GDP last year.  The country’s public debt as a % of GDP dropped from around 87% in 2020 to its current level of around 74%. However, this figure is extremely unattractive when compared to some of its regional peers, such as Chile and Colombia.   IMF Recent indicators show Brazil’s budget deficit reached a new high last June, so it may not be on track to significantly reduce its debt this year. Another concern is the country’s relatively high external debt figures, although its external debt has fallen to a new monthly low.   Focus Economics 2024 will likely be a bumpier and lower growth year for Brazil, as it may take several more months for the country's Central Bank to cut rates and bring them down to previous lows. Moreover, concerns over the country's higher sovereign debt will unlikely be resolved in the short term. The Equity Market Outlook is Very Positive Brazil’s stock market has had relatively lackluster performance since 2009, drastically underperforming emerging markets during this period. However, 2022 and 2023 have been very positive years, as it outperformed emerging markets by over 20 percentage points in these years.   MSCI One of the most intriguing aspects of the market now is that it trades at a whopping 50% discount to MSCI Emerging Markets, despite being one of the largest MSCI emerging market constituents. If a larger market like China or Taiwan were ever to be upgraded, this would bode well for Brazil and make it one of the top constituents in the MSCI Emerging Markets Index.   MSCI In this environment, investing in small-cap stocks could be a solid strategy to access the market at a lower valuation and avoid common large-cap names like Petrobras (PBR), Vale SA (VALE), and Itau Unibanco (ITUB). This ETF invests in around 94 companies and does not make large, concentrated bets of any specific name. In comparison, the iShares MSCI Brazil ETF invests around 37% of its assets in three companies.   VanEck Moreover, none of the companies in this ETF have a market cap that exceeds $5 billion. Another positive point about this ETF is that it provides stronger exposure to Brazilian consumer companies and less exposure to banks. In comparison, nearly half of the MSCI Brazil Index is comprised of energy and banking companies, which is one reason why the valuation is so low.   VanEck There are two main concerns with this ETF to note if you decide to choose this product over Brazilian ADRs or the iShares MSCI Brazil ETF (EWZ).   VanEck Higher expense ratio: The expense ratio for this ETF is very high. The iShares MSCI Brazil ETF has a slightly lower expense ratio of 0.59%. In my view, this slightly higher fee is worth the trouble, as it provides exposure to smaller companies in Brazil, while other larger ETFs invest in names like Petrobras and Vale, which can easily be accessed on US exchanges. Lower AUM: The AUM for this ETF recently dipped below $20 million, so there may be a chance of this ETF delisting in the future. Smaller emerging markets ETFs from countries like Egypt and Pakistan, which also had AUMs in this neighborhood, were also delisted recently. I think the risk of this is very low, especially if interest in Brazil picks up in 2025, since Brazil is a more dominant emerging market. Final Thoughts Both ETFs have had similar performance in the past decade, although this small, capped ETF has strongly outperformed during previous bull runs. Data by YCharts 2024 looks like an excellent time to initiate a position in Brazil, as the stock market is attractively priced, and the economy is poised to improve in 2025. This ETF still trades at an attractive 10.5x PE even though it has a superior industry makeup, with around 34% of its assets invested in consumer names.  In the short term, concerns over Brazil's political outlook, growth, and rising debt may result in stalled performance this year. However, Brazil looks like a solid long-term bet that can continue outperforming emerging markets, as it has in recent years, and this may be priced in markets in 2025 as the economy continues to improve.","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},"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/2456466552"}