Has Brazil bottomed out yet?
Stock prices in Brazil have plunged with the fall in commodity prices. The Brazilian equity-tracking iShares MSCI Brazil Capped ETF (EWZ) has fallen over 35% in the past two years.
As of March 9, 2016, companies such as Petrobras (PBR), Vale (VALE), Gerdau (GGB), and Companhia Siderúrgica Nacional (SID), which serve as pillars to Brazil’s export revenue, have fallen 52%, 71%, 78%, and 50%, respectively, over the past two years.
However, markets now expect Brazil to bottom out soon. The recent trend reversal in emerging market economies is seen by many as a sign that a reversal in Brazil’s fortune may be close. This makes investing in Brazil very attractive. Prices are down and should only rise from here, if indeed the markets have bottomed out. Forward performance has already begun to show signs of a reversal in trend.
Brazil is cheap: Are you out buying?
Brazil remains the cheapest option when you compare valuations across Latin American economies such as Brazil, Chile, Mexico, and Argentina. Pricing in future earnings, investing in Brazil could put you in a brighter spot with time. According to a Franklin Templeton release, Brazil is “economically strong; it’s just the policy mix that needs to be corrected.”
Brazilian debt has also begun to find its favor among investors. With a 14% yield on offer on the country’s local currency debt, bargain hunters are all out to shop.