Brazil ETF Steady As Petrobras To Stay In Government Hands

The iShares MSCI Brazil Capped ETF EWZ closed modestly higher Wednesday, extending its one-month gain to almost 12 percent. Brazilian stocks and exchange-traded funds such as EWZ could be boosted by plans to keep Brazilian oil giant Petrobras SA PBR in government control.

Although Brazil is looking to privatize some government assets to raise cash, Brazilian President Michel Temer said Wednesday that Petrobras would remain in government hands. Brazil, Latin America's largest economy, recently announced plans to privatize state-run utility Electrobras SA EBR, sending the shares higher by 56 percent over the past month.

EWZ, the largest ETF tracking Brazilian stocks, allocates about 4.6 percent of its weight to various Petrobras securities. Overall, the ETF holds 58 stocks.

A Symbolic Move

The decision to not privatize Petrobras appears to be tied to national pride, which is understandable given the company's dominant presence in its home country.

Temer said of Petrobras the company is “a very strong symbolism of national sovereignty for Brazilians. Naturally, we are not thinking of privatizing it,” reports Reuters. 

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While Brazil is one of Latin America's largest oil producers and one of the largest producers outside the Organization of Petroleum Exporting Countries, the energy sector is only a minor part of EWZ's lineup. The big Brazil ETF devotes just 7.4 percent of its weight to energy stocks, making that the ETF's fourth-largest sector allocation.

An Adventurous Idea

Aggressive, risk-tolerant traders operating with short-term holding periods, such as a day or two, can consider the Direxion Daily MSCI Brazil Bull 3X Shares  BRZU. The Direxion Daily MSCI Brazil Bull 3X Shares  attempts to deliver triple the daily returns of the MSCI Brazil 25/50 Index, the same index EWZ follows.

Up 25 percent month-to-date, BRZU is the best-performing member of Direxion's stable of bullish triple-leveraged ETFs in September. BRZU has also been one of the most volatile of Direxion's leveraged bull ETFs over the past month, according to issuer data. 

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