Investors frustrated with the poor performance of the largest ETF indexed to Brazil have been leaving the fund in droves this year.
The iShares MSCI Brazil (EWZ) has suffered net outflows of $1.5 billion so far in 2012 through the end of June, according to figures from the ETF Industry Association. EWZ holds assets of $7.1 billion and has seen one of the largest outflows this year among all ETFs.
Last year, the Brazil ETF drew net inflows of $1.4 billion.
The Latin American country is set to host the World Cup in 2014 and the Summer Olympics in 2016. [Brazil ETFs Gear Up for World Cup, Olympics]
Brazil is heavily reliant on exports and its stock market has been hit by fears that economic growth in China is slowing. The emerging market is one of the world’s top commodity producers.
EWZ has shed about a quarter of its value over the past year, according to Morningstar performance data. The fund does not hedge its foreign currency exposure so it suffers when the Brazilian real weakens against the dollar. [Brazil ETFs Hit by Weak Currency, Slowdown Fears]
The Brazil ETF has an expense ratio of 0.59% and sports a 30-day SEC yield of 3.9%, according to manager BlackRock.
“Brazil has a relatively healthy balance sheet, rosy growth prospects, and a growing middle class. Brazilian stocks and the real have been great long-run performers and are another way to access commodity returns,” says Morningstar analyst Samuel Lee. [List of Brazil ETFs]
However, he notes that Brazilian stocks can be risky and volatile. For example, the market plunged nearly 70% from peak to trough in the 2008 financial crisis, Lee said in an analyst report on EWZ.
Brazil is forecast to grow less than the U.S. in 2012, Forbes reports.
Earlier this week, the central bank cut interest rates as it tries to balance economic growth and inflation in Brazil, according to a separate report.
iShares MSCI Brazil