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  • One On One Of Investing Inside Brazil  0 comments
    Feb 16, 2013 4:22 AM

    More than 16,000 cars are sold in Brazil every day and its 2500 nationwide airports are the second highest in the world. The economy which is banking on the rising number of first time consumers for houses, cars and credit cards will be nestling an additional middle class population of +90 million by 2018 and this fact itself is the biggest lure towards the major Banking and Financial players of the country as they will be sufficing these newfound consumers on ground levels. Foreign investors seeking to diversify with the asset class must consider index attuned Brazil Financial ETFs listed on the FTSE / NASDAQ.

    The Brazilian capital markets have a proven prowess to buck global trends and post regular growth figures; as it did interim 2004-08. but at this time around where some prime stocks are available at one fifth of their life high stock prices, Brazil is again becoming attractive especially in the wake of the country hosting two global sports events. Investors will understandably look at the country's markets from a fresh perspective in anticipation of the cash flows and spending attributed to the Soccer World Cup to be hosted in 2014 and the 2016 Olympics, but that would be something like doing the right thing for the wrong reasons. Instead the focus here should be entering the commodity sector, as the country enjoys an abundance of nature's bounty along with the investments in Brazilian Financial sector, which again is an honest indicator of the nations' real growth and also one of the major contributors to it. As for sports, it will help in improving the sentiment but propose none lasting solutions to the current economic woes of the country where public is crazed with the carnivals and the Government with infrastructure spending.

    The current slowdown is evidently due to the low global demands of iron ore and issue pertaining to long and excessive public spending; Brazil on a broader horizon has outshined most developing nations and their emerging stock markets. From 2004 to 2008 it was a hot spot for investors. The stock market was up an astounding 350% while S&P 500 was up only by 41% during the same time. The economic growth (which was aided with the rising currency and healthy cash in-flows from the foreign sources) tracked around 8%.

    This nation's growth chart plummeted from 8% in 2008 to feeble 1.5% for the fiscal year 2012. This could turn into an optimistic opportunity as the best time to invest in such markets is when it is at its bottom and out of favour. The deal maker would be to invest especially for a long term in Brazil's top quality large cap bank equity.

    The heavy handed state policies are causing a shift again in form of interest rates, payroll taxes and energy costs as they all are expected to lower down. The president's announcement to slash taxes that make up 50% of the electricity tariff is a welcome move for all. State's efforts on curbing high production costs, heavy tariffs on imports and high taxes are well-timed. Unemployment figures for monetary year 2012 are at an extraordinary low. Wages are increasing and credit is readily available. Therefore domestic demand is rising and 200 million Brazilians are considered to be the middle class segment powered with more spending.

    The Latin American power house has crossed United Kingdom to become the world's sixth biggest economy. It has largest natural resources of iron ore and manganese and is a significant supplier of nickel and copper. These minerals are used in factories around the world and serve as a major source of export earnings for the country. According to the findings of Trade Analyst of Trading Economics Brazil is responsible for a gigantic 79% of the net global production of orange juice and accounts for a quarter of global exports of raw cane and refined sugar. With fundamentals in the right place and exposures that are strategic, broader Invest Brazil Financials Sector will discount for a lot of risk and volatility otherwise associated with this South American market.

    Global X Brazil Financials ETF [BRAF] was introduced in 2010 and is an equity traded fund that delivers as per the performance of the Solactive Global Brazil Financial Index with NYSE Arca being its primary exchange. At an annual fee of 0.77% BRAF offers a stable exposure to the top 25 Brazilian financial and banking stocks. ITAU UNIBANCO BANCO ADR, BANCO BRADESCO SPON ADR and BANCO SANTANDER ADR are the top three stocks for BRAF accounting for 30% of the net assets.

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