• / Free eNewsletters & Magazine
  • / My Account
Home>Will The Government Jolt The Brazil Infrastructure ETF?

Related Content

  1. Videos
  2. Articles
  1. ETF Conference Preview: Putting ETFs to Work

    Morningstar's third annual ETF -focused event, Oct. 3-5, will help both strategic and tactical investors better harness these vehicles in today's uncertain marketplace.

  2. Emery: Interest Rate Risk Still a Concern

    The Dodge & Cox Income manager discusses the fund's ongoing rate-risk mitigation, recent reduction in agency mortgages, and non-U.S. dollar-dominated picks.

  3. A Closer Look at Foreign ETF Managed Portfolios

    Accuvest Global Advisors' David Garff discusses the benefits of using CDS spreads in evaluating country-specific risk, how he looks at country correlations, themes driving non-U.S. equities, and more.

  4. ETF Strategy Growth a Boon for Advisors

    The growth in ETF managed portfolios has created numerous choices and complementary strategies for advisors to better serve their clients, says RiverFront's Peter Quinn.

Will The Government Jolt The Brazil Infrastructure ETF?

Why Brazil is still far from perfect.


While Brazil, Latin America’s largest economy, has previously been on the receiving end of ample praise by analysts, economists and experts around the world, the country is by no means perfect. In 2012, investors looking to samba with Brazil have had to contend with the country’s semi-socialist tendencies. Not to mention the fact that Brazil’s Petrobras (NYSE: PBR) is the piker of the world’s major oil stocks.

Another criticism of Brazil is a familiar one throughout the emerging markets universe: Decrepit infrastructure. It may be up for debate whether Brazil’s infrastructure is as bad as India’s, but the reality is that Brazil is no China on the infrastructure front. That is why reports of economic stimulus earlier this year stoked hopes that Brazil would make significant investments in roads, highways, bridges and more.

Credit Brazilian President Dilma Rousseff. On Wednesday she announced an almost $66 billion infrastructure package aimed at enhancing Brazil’s railways and roads and boosting a sagging economy.

For investors, the first option for profiting from the Brazil’s infrastructure binge does not have to be the iShares MSCI Brazil Index Fund (NYSE: EWZ). EWZ, the largest Brazil ETF, has had its troubles this year, but the fund has also rebounded nicely in recent weeks. Beyond that, the fund has gotten some support courtesy of Ray Dalio’s Bridgewater hedge fund, which took a stake in EWZ during the second quarter.

As the marquee Brazil ETF, EWZ is positioned to benefit from Rousseff’s commitment to improving her country’s infrastructure, but a more pure play is worth a look. Now that the Brazilian government has put its money where its mouth is, it could be time for the EGShares Brazil Infrastructure ETF (NYSE: BRXX) to show investors what its made of.

Some investors are already taking note of the EGShares Brazil Infrastructure ETF. Volume in BRXX on Thursday eclipsed the daily average with more than three hours left in the trading session. Quiet as it has been kept, BRXX has outperformed EWZ in the past month.

While BRXX features a weight of almost 39 percent to utilities, something that may diminish the fund’s correlation to the Rousseff infrastructure spending spree, industrials and materials combine for 37 percent of the ETF’s weight. In other words, the fund is well-positioned to take advantage of the Brazilian government’s new found respect for its roads and railways.

With an expense ratio of 0.85 percent, BRXX is a tough fund to endorse as a long-term hold. However, there are some other issues to consider. First, the ETF has a lower trailing price/earnings ratio and price/book ratio than some more well-known, standard emerging markets ETFs.

©2017 Morningstar Advisor. All right reserved.