- EWZ offers investors the chance to gain direct exposure to the Brazilian equity market.
- Brazilian equities appear to offer a strong earnings yield, as implied by the forward P/E ratio on EWZ.
- However, long-term domestic bond yields offer a similar (or greater) return, while the FX-hedged yield looks much tighter.
- Given a lack of Brazilian economic out-performance, I would not recommend U.S. investors allocate to Brazil.
- There is a conceivably positive outcome for EWZ via a stronger Brazilian real; however, we should not justify investing in EWZ based on this merely linear FX-based risk/reward.
For further details see:
EWZ: Brazilian Equities Are Not Worth The Risk