The 2014 World Cup of soccer has turned more than the eyes of soccer fans toward Brazil. Based recent price swings, traders and investors are also finding themselves intrigued by the dynamic nation. Brazil is the largest economy in South America with GDP of nearly $2.4 trillion (estimated as of 2012). As the media has clearly shown over the past week, no nation is free from problems. Brazil is still balancing economic growth with social issues, such as urban and rural poverty, crime, violence and drugs. Despite its internal struggles, the global nature of the financial markets makes Brazil one of the most intriguing nations for investment. In this article, we’ll take a look at many ETFs that retail traders can use to gain exposure to various segments of Brazil. (For further reading, see: Investing in Brazil 101)

The Brazilian Stock Market - BM&F Bovespa

The BM&F Bovespa, located in São Paulo, has a market capitalization of more than $1.22 trillion making it the 13th-largest stock exchange in the world. As you can see from the chart below, the Bovespa index reached its highest level in more than seven months on increasing speculation that President Dilma Rousseff is losing ground in polls for the country’s upcoming election. The recent bullish crossover between the 50-day and 200-day moving average suggests that the long-term trend in Brazilian assets is turning upward. Notice how the 200-day moving average has been acting as a strong level of resistance since late March. Investors and traders will likely continue to hold a bullish outlook on Brazil until this main index closes below 51,226.

Looking at the Large Caps

The strength of any nation’s economy can be found by analyzing the shares of its large-cap companies. Such companies offer tremendous diversification and scale, and are usually a great starting point for any investor or trader looking to invest in a relatively unknown area of the world. The most popular ETF for buying into Brazilian large caps is the iShares MSCI Brazil Capped ETF (EWZ). This fund as total net assets of nearly $5 billion and holds positions in 76 of the nation’s largest companies. The fee-conscious traders out there will be happy to learn that this fund carries a respectable expense ratio of 0.61%. (For more, see: It’s Time To Invest In Brazil)

For The Risk Takers: Small and Mid-Cap Stocks

Traders looking who are looking to take on more risk, there are several interesting ETFs that cover Brazilian small and mid-cap stocks - the Global X Brazil Mid Cap ETF (BRAZ), iShares MSCI Brazil Small-Cap ETF (EWZS) and the Market Vectors Brazil Small-Cap ETF (BRF). The riskier nature of small-cap stocks means that these ETFs are much more thinly traded than their large-cap counterparts so these funds should only be traded by those with experience. (For related reading, see: Is There Any Samba Left In Brazil's Stocks)

From a technical perspective, the recent crossover between the 50 and 200-day moving averages suggest that the long-term trend is now been confirmed to be in the upward direction. Increased money flow into Brazil will likely significantly benefit this group of stocks. The nearby averages provide and interesting risk/reward scenario and it wouldn’t be surprising to see traders set their stop-losses directly below $29.72 (red line).

Brazil Sector ETFs

If a trader wanted to only increase their exposure to a certain sector of Brazil rather than the entire market it's possible to do so with various ETFs. A few ETFs that fit the bill are the EGShares Brazil Infrastructure ETF (BRXX), Global X Brazil Financials ETF (BRAF) and the Global X Brazil Consumer ETF (BRAQ). These ETFs are still developing and don’t quite have the following as the broader market ETFs mentioned above so proceed with caution. It's not uncommon for some of these funds to only trade a few thousand shares per day, which means it can often be difficult to enter or exit a position without proper planning. There is no dispute that these ETFs are not for everyone, but they could be a wise choice for the strategic trader.

The Bottom Line

The World Cup has sparked renewed interest about Brazil among traders. As stated above, there are many different ETFs available for retail traders looking to buy into this dynamic country. While the ETFs mentioned in this article are a good starting point, you’ll find with a little research there are other interesting picks that should not be ignored. (For more, see: An Evaluation of Emerging Markets)

Related Articles
  1. Chart Advisor

    Brazilian Stocks Rolling Over, and What To Do About It

    Despite showing stregnth this year, the Brazilian ETF is in a long-term downtrend. Strong selling on May 20 has created a short-term top which could be enough to kick-start another down wave. ...
  2. Economics

    Has Brazil's Economy Peaked?

    There are many signs Brazil is at the top of its game economically with only one way to go - down.
  3. Personal Finance

    Top 6 Brazilian Billionaires

    Brazil is set to be an economic superpower in the near future, and these are some of the country's richest citizens.
  4. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  5. Chart Advisor

    Now Could Be The Time To Buy IPOs

    There has been lots of hype around the IPO market lately. We'll take a look at whether now is the time to buy.
  6. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  7. Mutual Funds & ETFs

    Buying Vanguard Mutual Funds Vs. ETFs

    Learn about the differences between Vanguard's mutual fund and ETF products, and discover which may be more appropriate for investors.
  8. Mutual Funds & ETFs

    ETFs Vs. Mutual Funds: Choosing For Your Retirement

    Learn about the difference between using mutual funds versus ETFs for retirement, including which investment strategies and goals are best served by each.
  9. Mutual Funds & ETFs

    How to Reinvest Dividends from ETFs

    Learn about reinvesting ETF dividends, including the benefits and drawbacks of dividend reinvestment plans (DRIPs) and manual reinvestment.
  10. Stock Analysis

    What Exactly Does Warren Buffett Own?

    Learn about large changes to Berkshire Hathaway's portfolio. See why Warren Buffett has invested in a commodity company even though he does not usually do so.
  1. Is Malaysia a developed country?

    Despite undergoing rapid economic development over the past five decades, Malaysia is not considered a developed country, ... Read Full Answer >>
  2. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  3. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  4. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  5. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  6. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>

You May Also Like

Trading Center