BRAF: An ETF Targeting Brazil’s Financial Sector

The Global X Brazil Financials ETF (BRAF) began trading yesterday (July 29, 2010).  This is first ETF to target Brazil’s financial sector and the third of six planned Brazil ETFs from Global X Funds.

According to the press release, the financial sector in Brazil is large and benefits from a decade of restructuring.  Brazilian loan portfolio values far exceed that of any other Latin American country, and are five-fold higher than second-ranked Mexico.  Financial investment in Brazil is expected to grow by 22% annually through year 2020.

“Brazil is establishing itself as the financial center of the region, thanks to strong macroeconomic trends over the past half decade of decreasing fiscal debt and unemployment, rising credit and industrial production,” says Bruno del Ama, CEO of Global X Funds.  ”Such trends plus favorable projections give a solid platform for financial sector growth going forward.  The Global X Brazil Financial ETF provides efficient access to these themes.”

The underlying Solactive Index from Structured Solutions AG weights each component proportionally according to its free-float market capitalization, using a multi-tiered capped weighting process.  Stocks are capped at 10% in the highest tier while the next tier caps them at 4.75%.  Cumulative weightings of components not fulfilling specific liquidity criteria are capped at 10%.

The BRAF fund summary indicates an expense ratio of 0.77% and provides links to other data sources.  The BRAF fact sheet (pdf) shows the total number of holdings at 25 with three limited by the the 10% cap:  Banco Bradesco, Itau Unibanco Holdings, and Banco Do Brasil.  Industry level weightings are Banks 44%, Real Estate 33%, Financial Services 16%, and Insurance 7%.

Other Brazil ETFs recently launched by Global X include Global X Brazil Mid Cap ETF (BRAZ) on June 22 and Global X Brazil Consumer ETF (BRAQ) on July 8.  Additional ETFs targeting the Industrials, Materials, and Utilities sectors of Brazil are expected later this year.

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.