We have seen some interesting upside call action as of late in the largest Brazil Equity oriented fund, the tenured EWZ (iShares MSCI Brazil Capped, Expense Ratio 0.62%, $4.2 billion in AUM).
EWZ debuted way back in the year 2000, when the music of Matchbox Twenty, Creed, and Destiny’s Child ruled the Billboard charts (unfortunately). The March 40 calls have traded in good size this week, and EWZ received a nice lift yesterday in a volatile session. Thus far today, it’s following through rather strongly, with an additional >0.7% surge, now trading at its highest levels since last November.
Brazil’s move here is not in a bubble, as Crude Oil has firmed up in the past couple sessions. Brazil of course is a known major exporter of crude (12th largest producer in the world), and Emerging Markets in general have been on a tear since 2017 began as well (reference EEM (iShares MSCI Emerging Markets, Expense Ratio 0.67%), where Brazil carries an 8% weighting). The real story, however is likely the surprise policy move that the Brazil central bank unleashed into the market yesterday morning where they slashed interest rates by 75 basis points. Most analysts were expecting a more modest 50 basis point cut.
A Bloomberg.com article titled “Brazil Surprised With Deep Rate Cut, Signals New Easing Pace” states “In a strong message to start 2017, the bank said inflation appears to be converging to target and growth remains weaker than expected. The cut was the deepest yet of the current easing cycle, which began in October of last year. While inflations has hit its slowest level in over two and a half years, high debt levels and waning confidence among both businesses and consumers still hinder the recovery of an economy mired in deep recession.”
Judging by present asset levels in the marketplace, EWZ still remains the go-to fund for portfolio managers and traders, in that EWZ holds >$4.2 billion in assets, and the next closest fund in the space has only about $100 million in AUM, FBZ (First Trust Brazil AlphaDEX, Expense Ratio .0.80%). Two levered “Bull” funds, however may see an uptick in activity here especially if the rally in Brazil sticks. Specifically, these are BRZU (Direxion Daily Brazil Bull 3X, Expense Ratio 0.95%) and UBR (ProShares Ultra MSCI Brazil, Expense Ratio 0.95%).
The iShares MSCI Brazil Index (ETF) (NYSE:EWZ) was trading at $36.39 per share on Thursday morning, up $0.36 (+1.00%). Year-to-date, EWZ has gained 9.15%, versus a 0.82% rise in the benchmark S&P 500 index during the same period.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.