EWZ - EWZ: Worth The Risk Despite Lula Intervention
2024-05-29 20:52:27 ET
Summary
- The EWZ tracks the performance of the MSCI Brazil index, which is dominated by commodity stocks and characterised by a high dividend yield and cheap valuations.
- Sentiment towards Brazilian stocks has been undermined by the government's decision to replace the CEO of oil giant Petrobras, raising fears of further government intervention into the corporate sector.
- The ETF is extremely undervalued relative to its own history and EM peers, and its high FCF and dividend yield suggest it should outperform even if the discount remains intact.
- As we saw in the early 2000s, rising commodity prices have proven to paper off the cracks of poor policy in the past and recent commodity strength should support EWZ.
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EWZ: Worth The Risk Despite Lula Intervention