Turning point for Brazilian Equities | EWZ
The MSCI Brazil index has been the worst performing major market in the world since the beginning of 2020 even as the commodity price rally has helped drive a surge in earnings and dividends.
Brazilian stocks have underperformed significantly due to excess fiscal spending, rising inflation, concerns over next year's election, and a collapse in iron ore cost. However, these risks are manageable today due to the country's improved external picture and the country's assets should outperform over the coming years. While the EWZ pays a dividend yield of just 3.0%, the 7+% forward dividend yield on the underlying MSCI Brazil suggests that EWZ investors can expect the yield to soar over the coming months.
Brazil is a commodity based economy: Leader in sugar, soybeans, coffee, beef, oranges, ethanol, and iron ore with EWZ having reasonable diversification, but somewhat overexposed to Banking (24%) and Materials. (22%)
With Iron Ore overdue for a bounce and a strengthening Brazilian Real, I believe the outlook for Brazil is becoming more favorable.
On the weekly, RSI is starting to up tick out of oversold conditions and bearish momentum is bottoming. Want to see a break of the descending trend line before entering a trade. EWZ is on close watch.
Risks:
- Tighter monetary policy as the Central Bank of Brazil has been actively raising rates in an effort to contain inflation
- Weakening commodity prices, particular Chinese Iron Ore.
- USD strength as risk off sentiment is increasing
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✅ Follow for swing ideas, trade setups and weekly 0DTE income trades.
✅ Don't hesitate to post comments, opinions and questions.
💸 WHAT IS 0DTE TRADING?
The Chicago Board Options Exchange ( Cboe ) lists weekly options on the S&P 500 Index (SPX) with expirations every Monday, Wednesday, and Friday. Most options expire worthless and we take advantage of this by selling credit spreads to collect premium. This strategy allows us to profit if the market moves up, down or doesn't move at all. See profile to learn more!
Brazilian stocks have underperformed significantly due to excess fiscal spending, rising inflation, concerns over next year's election, and a collapse in iron ore cost. However, these risks are manageable today due to the country's improved external picture and the country's assets should outperform over the coming years. While the EWZ pays a dividend yield of just 3.0%, the 7+% forward dividend yield on the underlying MSCI Brazil suggests that EWZ investors can expect the yield to soar over the coming months.
Brazil is a commodity based economy: Leader in sugar, soybeans, coffee, beef, oranges, ethanol, and iron ore with EWZ having reasonable diversification, but somewhat overexposed to Banking (24%) and Materials. (22%)
With Iron Ore overdue for a bounce and a strengthening Brazilian Real, I believe the outlook for Brazil is becoming more favorable.
On the weekly, RSI is starting to up tick out of oversold conditions and bearish momentum is bottoming. Want to see a break of the descending trend line before entering a trade. EWZ is on close watch.
Risks:
- Tighter monetary policy as the Central Bank of Brazil has been actively raising rates in an effort to contain inflation
- Weakening commodity prices, particular Chinese Iron Ore.
- USD strength as risk off sentiment is increasing
___________________________
✅ If you found this idea useful, hit the like button, follow & share.
✅ Follow for swing ideas, trade setups and weekly 0DTE income trades.
✅ Don't hesitate to post comments, opinions and questions.
💸 WHAT IS 0DTE TRADING?
The Chicago Board Options Exchange ( Cboe ) lists weekly options on the S&P 500 Index (SPX) with expirations every Monday, Wednesday, and Friday. Most options expire worthless and we take advantage of this by selling credit spreads to collect premium. This strategy allows us to profit if the market moves up, down or doesn't move at all. See profile to learn more!
