Brazil

[winston]

Brazilian stocks are building a new uptrend… country fund EWZ is up 21% over the past six months, including dividends.

[winston]

Brazil kept interest rates at 11%

Source: CNBC

[winston]

Brazilian stocks are building an uptrend… country fund EWZ is up 30% over the past six months, including dividends.

[winston]

Brazilian stocks shift back into a downtrend… country fund EWZ breaks down to a six-month low.

[winston]

Chanos takes profit on his top 2014 short sale - Brazil

http://www.reuters.com/article/2014/10/ ... Name=usdai

[winston]

Brazilian stocks fall fast… country fund EWZ drops more than 20% over the past two months.

[winston]

Get Ready to Buy Brazil By Jeff Clark

In June, I told you to bet against the Brazilian stock market.

Brazil's stock market was up 20% in just three months and within striking distance of an all-time high. Everyone seemed to think the rally would continue.

But as I showed, there was "negative divergence" on the chart. Although the benchmark Brazilian Bovespa Stock Index was making higher highs, its momentum indicators were making lower highs. Negative divergence is a strong warning sign a rally is coming to an end. So Brazil was an ideal short-sale trade.

After my essay, Brazil's stock market did rally for a couple more months – hitting a new high in August. Since then, though, the negative divergence has taken its toll…

Take a look at this chart of Brazilian stock fund EWZ…

Please Enable Images to See this

EWZ is now trading 21% below where it was back in June. It's 30% below its late-August high.

If you shorted Brazil back in June, you're sitting on solid gains. And now it's time to cash out.

By the look of the chart, Brazil's stock market is gearing up for a rally. The technical condition of the chart is almost the exact opposite of what it was back in June.

EWZ has been falling and making lower lows. But notice how its Moving Average Convergence Divergence (MACD) momentum indicator – a measure of overbought and oversold conditions – has been pushing higher. This "positive divergence" is an early warning sign that the decline in Brazil is nearing an end.

So it may be time to start thinking about buying Brazil. The price action remains weak, without any signs of a reversal so far. But the positive divergence should eventually play out. I expect Brazil's stock market will be higher six months from now than where it is today.

Source: www.growthstockwire.com

[winston]

Time to buy Brazil ?

Regular readers will know that I’ve steered clear of Brazil throughout my New World tenure. This time last year I remained sceptical, explaining that “I’m not convinced of a Brazil turnaround just yet”.

And Brazil’s main index, the Bovespa, hasn’t made me regret my decision, as it’s down on last year. Brazil’s currency, the real, has also taken a pasting, increasing losses for investors that hadn’t hedged their positions.

Many investors blame the president, Dilma Rousseff, who won another mandate in October. During her first term Rousseff presided over an economic nightmare that saw growth go from 7.5% in 2010 to practically flat in 2014.

Of course it wasn’t all her fault. External factors such as slowing commodity prices didn’t help, and tighter credit sapped domestic demand. But investors did blame Rousseff for an interventionist economic policy that saw the state heavily involved in key sectors of the economy. And investors were dismayed by the ‘creative accounting’ that saw Brazil stick to its fiscal targets in name more than spirit.

But since Rousseff won her second election in October, early signs have been positive. Her first move was to appoint former Bradesco Asset Management CEO, Joaquim Levy, as finance minister. The former investment banker immediately pledged to improve the country’s struggling public finances.

The plan is for a 1.2% primary surplus in 2015, followed by a 2% surplus in 2016, which is expected to be maintained in subsequent years. Another key appointment was Nelson Barbosa, a respected economist, as planning minister. He will be in charge of directing Brazil’s huge infrastructure programme – an important job given Brazil’s notorious infrastructure problems.

So is this enough to convince me to change my mind? Well I’m not too sure about the politics. For example Barbosa’s first announcement – a plan to revise the calculation of the minimum wage – was hastily retracted one day later. Local press reports claimed that unions had persuaded Rousseff to overrule her minister… not an encouraging start.

However the slide in the stock market coupled with the fall in the currency can’t be ignored forever. My resolution for this year will be to look for ridiculously cheap Brazilian stocks, especially if they’re in industries, such as manufacturing, that should benefit from the weak real. I’ll let you know how I get on.

Source: New World

[winston]

Brazilian-stock fund EWZ drops to a 52-week low... shares are down 30%-plus in five months.

[winston]

Brazil’s water shortage is a big, bad buying signal by James McKeigue

Let me put this as clearly as I can: Brazil is in crisis.

Brazil’s industrial heartland, the state of Sao Paolo, is in the grip of a fierce drought. The 20 million inhabitants of the country’s biggest city are now facing water rationing, as are its largest firms. Around three-quarters of Brazil’s electricity comes from hydroelectric sources, so power shortages are likely.

As if that wasn't bad enough Brazil's political and business elite is being torn asunder by the ongoing Petrobras scandal. Allegations of corruption within Brazil’s state oil company have now spread from the country’s largest corporations to its main political parties. Just months after her election victory, President Dilma Rousseff is facing calls to be impeached.

All of this comes as Brazil’s economy continues its downward slide to recession. The heady days of 7.5% GDP growth in 2010 must seem a lifetime away for Rouseff now. Last year GDP grew by just 0.1% and most analysts reckon 2015 will see a recession.

Regular readers won’t be too surprised by all of this. Ever since I started covering Latin America for MoneyWeek back in 2012, I have warned readers to stay away from Brazil. Steering clear of the region’s biggest economy hasn’t been easy, but it’s paid off. The Bovespa is down by 20% since its 2012 highs.

Brazil’s had structural problems for decades, and been overpriced for years. Now that’s only half-true. The country still has serious problems, but now it’s cheap as chips.

You might think Brazil looks like an awful investment opportunity, and until recently I would have agreed with you. Now, though, the negativity around Brazil has reached such fever pitch that the contrarian in me is itching to invest. Let’s look at the problems that have got investors running scared.

Short-term greed screwed Brazil into the ground

Let’s start with the drought, which has the potential to be the most serious of all the problems. Brazil has gone through a dry patch, with the famous rainy season failing to live up to its name for several years on the trot. But this isn’t just about a lack of rain – there are more deep-rooted structural causes.

Lots of scientists believe deforestation is to blame. Over the years, Brazil has hacked down incredible amounts of its forests, for logging and farming. Regardless of whether you believe in global climate change or not, it seems quite plausible that such huge changes would have an effect on a local scale.

Economic growth has also had an impact. In the 20th century Sao Paolo became the most densely-populated and industrialised part of Latin America. That’s pushed up demand for drinking water, while also reducing its supply thanks to contamination and industrial use.

But what’s really frustrating for Sao Paolistas is that despite all of the above, the water shortages could have been avoided. After all, we’re not talking about the Gobi Desert here - Brazil has the world’s biggest supply of freshwater. But Sao Paolo’s water has been terribly mismanaged. Around 30% of drinking water is lost through leaks in the system, while only 30% of wastewater is treated. That untreated water goes on to contaminate local rivers, reducing the supply of clean water. Experts have been warning about looming water shortages for years, yet no politician has wanted to make the tough decisions to deal with the problem.

At the moment the impact is quite cosmetic –restaurants, for example, are serving meals on paper plates to avoid washing up – but when industrial users face water shortages then the economy will suffer. If the drought continues, Brazil’s hydro plants will suffer, and power supplies will stutter.

But I'd back Brazil to improve its water management. Technically it’s not impossible it's just that until now the issue has been that no-one thought it politically worthwhile to solve the problem. Now fixing the water will become Sao Paolo's number one vote issue. If water management improves, businesses will be more secure.

Corruption has destroyed Brazil’s pride and joy

Brazil has also been stung by corruption, which I covered in great detail in December.. Essentially, when Brazil found lots of offshore oil, Petrobras embarked on one of the world's biggest corporate investment programmes. With oil heading towards a record high of $148 a barrel, the company ambitiously planned to build a fleet of ships, rigs and refineries to ensure that the country made the most of the bonanza. Unfortunately, the oil has proved difficult to extract and the production schedule has gone awry.

Even worse, it's now emerged that Petrobras officials were deliberately overpaying for goods and services to earn kickbacks from contractors. These bribes were shared among greedy politicians to ensure government support. We still don’t know how much exactly but the conservative estimates are talking about billions of pounds’ worth of kickbacks.

Brazilians are used to corruption but this one has hit them hard. Petrobras has a place in Brazilian society that is hard to imagine any British firm having here. It was an immense source of national wealth and pride. Unsurprisingly, the majority of Brazilians think that Rousseff, who was Petrobras Chairman while all this was going on, must have known about it. With her approval ratings standing at all-time lows, some political opponents have started to call for her impeachment. Analysts reckon that she will probably survive, but the battle to find scapegoats and the huge numbers of likely culprits mean that the business and political atmosphere will be toxic.

All of the above means that the politicians and businesspeople will have less attention to give Brazil's economic woes.

There's no doubt that the corruption scandal is bad, even by Brazil's standards. But in many ways the economic damage has already been done: now it’s a case of cleaning up. The political fallout will continue a little, then be resolved one way or another. Now could be the perfect time to invest, while markets are glum but before a recovery sets in.
Opportunity amid the gloom

Yes, the short-term position is dire but I'm a medium- to long-term investor and over that time frame Brazil looks alright.

I'm certainly not bullish over the Brazilian economy. Analysts expect a recession this year and I think it will take Brazil a long time to sort out its structural issues. Brazil may not grow as well as it should, I think it will still reward investors: it’s just so cheap right now.

Brazil's market is now down 30% from its 2008 peak, trading on a forward price/earnings ratio of 11.3 (this means the price of one share in the index divided by the index’s projected earnings per share for 2015 – a measure of how expensive the index is relative to the amount of money its companies are making).

The local currency, the real, has also taken a battering. It's at a ten-year low against the pound. So if, as a sterling investor, you buy a Brazilian stock, you also stand to gain if the real strengthens.

There's lots of ways you could play this. My personal favourite would be through a tracker of Brazil's main stock index, the Bovespa. The reason that I'd go for an ETF instead of an actively managed fund is that this story could get worse before it gets better; you might be holding the position for a few years. If so, you want your annual management charges to be as low as possible. One option is the iShares MSCI Brazil UCITS ETF (LSE:IBZL).

If you insist on going down the actively managed route - and I am not recommending this - then check out BlackRock's Latin American Investment Trust (BRLA). I've met the manager Will Landers a few times and he definitely knows his stuff. The annual charges are higher, of course, but the trust is trading on a discount to net asset value of 9%. If sentiment towards Brazil changes you will get an extra boost.

Changing a long-held investment position like this isn't easy. I won’t be able to use every bad story coming out of Brazil as an excuse to tell you 'I told you so', but when Brazil is this cheap, it’s time to get off the sidelines.

Source: The New World