Brazil’s Political Crisis Weighs on These ETFs (EWZ, BRZU)

International investors betting on emerging markets can be forgiven for feeling under the weather, particularly if their main focus was on backing a Brazilian economic recovery. Stocks across the Latin American country plunged considerably on Thursday after the recession-plagued nation’s president Michel Temer became embroiled in a toxic bribery scandal.

According to Brazilian newspaper O Globo, Temer was recorded given his consent to pay for a witness’ silence in a huge corruption scandal. This damaging revelation led opposition leaders to call for his resignation and sent the Sao Paulo Stock Exchange plummeting by more than 10 percent, causing the benchmark Bovespa index to be temporarily suspended as doubts spread over the validity of the president’s economic reforms.

ETFs Caught in the Crossfire

The huge sell-off of Brazilian assets had a notable impact on the many exchange-traded funds (ETFs) exposed to the nation’s stock market. iShares MSCI Brazil Capped (EWZ

), the biggest U.S.-traded Brazil ETF, initially tanked by as much as 23 percent after shares in its largest holdings, including bank Itau Unibanco,…