The Ibovespa, which is an index of about 50 of Brazil’s largest and most widely-held stocks, closed up for the eighth week in a row.
The local equity gauge has advanced 64 percent in dollar terms this year, the biggest gain among major benchmarks worldwide, as improved prospects for Brazilian companies that rely on exports added to bets that a new government will be able to restore growth in Latin America’s biggest economy.
“The mood in Brazil’s market has been very optimistic in recent weeks with a better outlook for exporters and speculation over the recovery plan,” said Luis Gustavo Pereira, an analyst at the brokerage Guide Investimentos in Sao Paulo. “A strong U.S. is positive for us, and gains in commodities always help our companies.”
Some investors are also betting that Brazil’s markets will see a sustained impact from hosting the summer olympics in Rio. That’s probably not a safe bet however, because with valuations already stretched, the Olympics’ impact is probably already priced in.
However, if precious metals continue to rise this year, Brazil’s markets will likely follow. The country’s economy is heavily dependent on natural resource exports, with about 10% of its GDP coming from materials. It’s also close to being top ten gold producer in the world markets.
The iShares MSCI Brazil Index ETF (NYSE:EWZ) rose $0.10 (+0.30%) to $33.86 in Friday afternoon trading. EWZ is the most popular way for U.S. investors to play the Brazilian market, and its makeup is very similar to that of the Ibovespa index. The ETF has gained 63% year-to-date, outpacing the returns of the S&P 500 in the same period by more than 9-to-1.