Rio 2016: Using ETFs to Play Brazil's Olympic Win

Rio de Janeiro has been named the winner to host the 2016 Olympics. What could this mean to Brazil’s already bustling economy and its exchange traded funds (ETFs)?

Brazil’s economy has already been humming along, but two major sporting events could just be the icing on the cake: Rio de Janeiro has been tapped to host the 2016 Summer Olympics and Brazil will also host the 2014 World Cup soccer championship.

Other points in favor of the growing country’s economy, according to Charles Kraul for The Los Angeles Times:

• The International Monetary Fund (IMF) predicts that Brazil will outperform Mexico in 2009
• Consumer spending in Brazil is a big part of the country’s success; government incentives have also helped
• The government mandates that subsidized loan rates on homes and appliances be underwritten by state-owned lenders
• Public sector jobs have been added and welfare payments have been increased by 30%
• Brazilian interest rates are at 8.5%, the lowest they’ve been in history in real terms

There are several ways to play Brazil’s growth story with ETFs. The most direct is the single-country fund, iShares MSCI Brazil (NYSEArca: EWZ). It’s up 90.1% year-to-date. The fund has its heaviest weightings in materials and financials, which make up more than 50% of the fund. The materials sector could especially benefit as Rio builds the necessary buildings and stadiums to host the Olympics.

Another play is the Market Vectors Brazil Small-Cap (NYSEArca: BRF), which is up 12.7% in the last month. Small-caps tend to do well in a recovery, and this fund also has heavy weightings in consumer discretionary, industrials and materials – all areas that could benefit while Rio builds up and starts selling Olympics-related products.

The Brazilian real is also on what many analysts say is a sustained uptrend. This year so far, it’s the world’s second-best performing currency and it’s on track to rally for an eighth consecutive month, report Fabio Alves and Paulo Winterstein for Bloomberg. Next year, Brazil’s IPOs could double as the stock market continues to rally. One analyst believes that the real will rally to 1.80 per dollar by the end of this year. WisdomTree Dreyfus Brazilian Real (NYSEArca: BZF) is up 28.7% year-to-date.

For more diversified exposure, both iShares MSCI Bric (NYSEArca: BKF) and Claymore/BNY BRIC (NYSEArca: EEB) have heavy weightings in Brazil, along with exposure to the other four BRIC countries (India, Russia and China). They’re up 64.4% and 64.2% year-to-date, respectively.

Comments

[notsosmart:]

the citizens of chicago can count their lucky stars. all that graft & payout is going somewhere else. its too bad the cost of the pres. trip could not have been used to fight crime in chicago.

Oct 03 03:25 PM

[mals:]

You have listed five ETFs. Is there one fund that captures all of the components of the five ETFs?

Oct 03 05:05 PM

[mals:]

I doubt any city in USA had a chance given the severe visa restrictions and the unpopularity of USA in many of the third world countries. I was surprised to read that Chicago was a front runner. With Rio in the running almost no other city had a chance.


On Oct 03 03:25 PM notsosmart wrote:

> the citizens of chicago can count their lucky stars. all that graft
> & payout is going somewhere else. its too bad the cost of the
> pres. trip could not have been used to fight crime in chicago.

Oct 03 05:08 PM

[Mad Hedge F...:]

ngw Hoping to beat the rush, I ordered my Rosetta Stone Portuguese language program last week, fully expecting Rio de Janeiro to win the 2016 Olympics bid. Pick pockets of the favellas of Latin America’s largest city were ebullient. A cheer even went up on the floor of Chicago’s CME, now that the denizens of the Windy City are dodging a monster tax bill. Of course, Obama was in a no win situation, with mud on his face for his failed pitch, and blamed for defeat if he didn’t go. There was never any doubt that the home of the string bikini and the banana thong was going to win. In order to justify the gargantuan cost of the modern games, the International Olympic Committee long ago turned this into an emerging market development program. The great news for investors is that corresponding emerging stock markets have a history of tenfold returns going into the games. Look at South Korea and China. Only the 2004 Athens games were a bust, the home of the Olympics building a games that were far more than it could afford. I have long been a fan of the country that is doing everything right, with a perfect demographic pyramid and a liberal pro business government fueled by resource and energy exports. I managed to catch a 270% leap for my subscribers in the ETF (EWZ) this year. I wouldn’t’ rush out tomorrow and buy on the news, as an impending global stock market selloff is likely to pull it down with everything else. But it definitely should be at the top of your “buy on dips” list.

Oct 04 05:29 AM

[fran:]

no.


On Oct 03 05:05 PM mals wrote:

> You have listed five ETFs. Is there one fund that captures all of
> the components of the five ETFs?

Oct 04 09:51 AM

[sacking:]

I've been in ILF, EWZ and BRF all year. They have been outperforming the market. Unfortunately that means they outperform down as well as up. But assuming we're in an uptrend with some minor corrections, I would strongly suggest buying the dips and getting into these funds for the long-term run. Go Brazil

Oct 04 11:06 AM

[WKMA:]

how w/Chicago (I'm a resident) go forward now??

Oct 04 04:49 PM

[roy piper:]

Did I really just read that a POSITIVE reason to invest in Brazil is because welfare and public sector jobs are up 30%??? And that another reason is because the government gives out loans to people at below market rates by edict?? Mr Lydon, you have a very....uhhh...unusual idea of what constitutes a healthy economy! Ben Bernanke and Barney Frank would love you!!

Oct 05 04:26 AM