Pre-World Cup Bounce For Brazil ETFs

Jun.11.14 | About: iShares MSCI (EWZ)

Summary

Trading can slow in Latin America stock markets during 2014 World Cup.

How Brazil ETFs are reacting ahead of the World Cup.

Brazilian equities showing strength.

It will not be surprising to see Latin American equities, including Brazilian stocks, get a little sluggish when the 2014 World Cup commences on Friday in Brazil.

That much is almost a guarantee. During the 2010 World Cup, Chile saw the sharpest drop in trading activity as volume plunged 99.5% when their national team was playing and 79% when other nations were playing while Brazil saw a fall of 74.5% in trading volume when their national team was playing and a 28.5% fall when other nations were playing," according to Emerging Equity.

However, investors cannot accuse the iShares MSCI Brazil Capped ETF (NYSEARCA:EWZ) of being lethargic before the World Cup. On Monday, the largest ETF tracking Latin America's largest economy, surged 3% on volume that was 14.3% above the daily average. That follows a 3.3% gain last Friday after another poll showed declining support for President Dilma Rousseff.

Importantly, EWZ is again showing noticeable relative strength against the S&P 500 following a multi-week retreat that was seen last month. According to Captain John Charts, which highlighted EWZ on Monday:

Our first and foremost objective is to find out where the relative strength resides in all asset classes, we compare international and domestic stocks, bonds, currencies commodities and cash against each other to try to identify where the money is going.

With a year-to-date gain of almost 14%, EWZ is the second-best performer of the four major single-country BRIC ETFs, trailing only the WisdomTree India Earnings Fund (NYSEARCA:EPI).

To be precise, EWZ is up 13.7% this year, a performance that is an average of 450 basis points superior to the Vanguard FTSE Emerging Markets ETF (NYSEARCA:VWO) and the iShares MSCI Emerging Markets ETF (NYSEARCA:EEM), the two largest emerging markets ETFs.

Since the start of the second quarter, EWZ has pulled in $156 million in new assets. Last year, the ETF was one of the 10 worst in terms of outflows with $3.6 billion in lost assets.

iShares MSCI Brazil Capped ETF

Chart Courtesy: Captain John Charts

ETF Trends editorial team contributed to this post. Tom Lydon's clients own shares of EEM.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.