Brazilian stocks and ETFs have been a tear with large-cap Brazil fund iShares MSCI Brazil Capped (NYSEARCA:EWZ) adding over 100% in the last one year (as of February 14, 2017) and advancing about 17% so far this year. Hopes of new reforms that can shore up the country’s recession-stricken economy after the subsequent impeachment of president Dilma Rousseff, commodity strength and easing inflationary pressure perked up Brazil ETFs.
In view of cooling inflation (which was once sky-high) and soft economic growth, Brazil embarked on an aggressive policy easing cycle. The country slashed interest rates by 25 bps for the first time in four years in mid-October, giving signs of a turnaround in the long-ailing economy.
The Brazilian central bank again cut rates by 25 bps in November and 75 basis points to 13.00% in early January, surpassing market expectations of a cut of 50 bps. This boosted consumer confidence in Brazil as low rates provide some relief to debt-ridden families and perk up business sentiments.
Coming to the growth picture, the Brazilian economy contracted 0.8% quarter on quarter in Q3, in line with market expectations. This marked the seventh quarter of contraction in a row. But many economists are being bullish on Brazil investing as they expect the economy to approach growth soon….