Upside in Emerging Markets: Brazil is Bouncing

Measured in dollars, Brazil's stock market is up 57% from its lows of Nov. 21st, 2008, whereas the S&P 500 is up only 10%. Brazil's market had previously lost about 70% of its value, since Brazil was at the apex of the global financial storm: commodity prices had been crushed, the dollar was rebounding, and investors were unwinding carry trades.

All of those pressures are being reduced now: the dollar today is about the same as it was in late November, commodity prices are generally higher, and investors and speculators have had plenty of time to unwind carry trades and deleverage. There is plenty of upside in emerging markets if the global economy simply avoids depression and deflation, and by the looks of things, a modest recovery appears to be getting underway.

Full disclosure: I am long shares of SLAFX and EMD.

Comments

[Sandeep Daga:]

It's time to seriously relook at decoupling thougths. Similar trend can be seen in China and India. If you restrict BRIC to BIC, I think good time to get back to the tigers of world growth in the next wave.

Apr 09 03:38 AM

[Ferdinand E...:]

Brazil is different from many so-called 'emerging' countries. I remember Professor Kindelberger saying that it is one of the richest countries in the world. I had some problem believing that until, a couple of centuries ago, I met some students from that country who were staying in the gym at the engineering school in Stockholm where I was studying. They could compete with anybody.

Apr 09 09:09 AM

[Tony Daltorio:]

Absolutely agree with your comment. There has been a fountain of misinformation coming from Wall Street about the emerging markets. Long-term equity investors should look to China, Brazil, etc. for future gains, not to the US.


On Apr 09 04:21 AM Dave Wrixon wrote:

> If their efforts were working and were the cause fo the rebound the
> effect would be seen in the US first.
>
> The rebound is primarily due to the panic in emerging markets being
> sustantially overdone largely due to viscious and deliberate misinformation
> coming out of the US.
>
> The recoveries in the emerging markets will prove enduring. The so
> called recovery in the US will prove illusory.

Apr 09 09:10 AM

[oldfolkdancer:]

Brazil and the Brazilians remind me of the USA in the 1950's.

Apr 09 11:49 AM

[Eric in IL:]

Of all the emerging markets, I am most bullish on Brazil. They are the real deal. The danger of the EWZ ETF is that it is primarily made up of a couple companies, so don't think you'll be diversified by buying it.
Oldfolkdancer is exactly right. I think you are gonna be looking at a 50 year bull cycle for Brazil. Your portfolio needs to be overweight Brazil.

Apr 09 01:34 PM

[User 392116:]

Brazil is one of the richest countries in the world.
Brazil and the Brazilians are similar to the USA in the 1950's
We are working in Brazil petroleum industry and the future look very promissing

Apr 09 02:05 PM

[Jade Queen:]

I just watched a documentary on the world's best urban politics. I just bought some EWZ. Brazil has some under-the-antique-media truly good buzz going on. The lessons of the 70's did not get lost there. Their architects and engineers have done some serious preparation and problem-solving. Brazil is better prepared for current conditions than many other places, and they have some examples of transparent corporations as well.

Apr 09 07:37 PM

[nmelendez:]

I agree with Brazil but not China. A bear is a bear, even if it smiles. China is still a communist country and will try and control markets. Brazil, on the contrary, is fully democratic and open to capitalism. It presently has a grudge match going with Bolivia because of Bolivia's nationalistic trend to nationalize any company it wants and brazil had been doing a lot of business with Bolivia. Bolivia and Venezuela are ruining it for all of Latin America. Also bullish on Argentina(Food), Chile(resources) and Costa Rica(Great retirement and future location of Tech companies)

Apr 09 08:33 PM

[Nicholas1980:]

Argentina(food)? I would stay away since that country's policies are just a failure of Venezuela, you can't trust the numbers of the goverment that is littlerly sponsored by hugo chavez. Costa Rica(Great retirement and future location of Tech companies)??? Uhmm, it's stable, but but...not to be in an area that is highly possible to be hit by a hurricane, I would check out more the north east of Brazil for retirement that offers more than the Central American nations combined and super relaxer. For Tech companies? check it out the south where there the Germans tech companies and american (microsoft and google) invest more..why? Highly educated, young (most of them bilangual and from northern European countries descent) and dynamic population and the areas/states are as developed like or some higher than european nations and higher than in most south american nations. The joke was "Brazil, will always be the land of the future"...If you just ignore that joke, and the so called experts in the developed world who comes mostly with out dated info about Brazil, you do your own home work and see with your own eyes and hear with your own ears that the future has arrived in Brazil, but has a long way to go, and come to the conclusion that it works and that they learned their lesson of their own misserable past and of course from our Government idiotic policies, while we were suppose to know better.

Aug 20 11:21 PM