Brazil stocks have been rallying since Bolsonaro’s presidential victory in October last year.
On Wednesday, the World Health Organization reported, over 100,000 COVID-19 cases, the most in a single day since the outbreak began. Director-General Tedros Adhanom Ghebreyesus said two-thirds of the cases were reported in just four countries, but failed to name the four countries.
Dr Mike Ryan, WHO's top emergencies expert, recently said South America has become a new epicenter for COVID-19 cases. Within South America, Brazil has become the epicenter as there are now over 310,000 infected and 20,000 people died from COVID-19. Brazil’s death toll is the highest in the world and deaths from COVID-19 have doubled in less than two weeks.
Investors have dumped Brazilian stocks and its currency this year after the coronavirus or Covid-19 pandemic dragged on the economy and worsened the country’s already-weak fiscal outlook. Furthermore, Brazilian markets have further sold off after a round of political turbulence and a lack of confidence in President Jair Bolsonaro, who downplayed the coronavirus threat even as Brazil suffers through a surge in new infections.
Brazilian stocks are down more than 48% when measured in the U.S. dollar. Goldman Sachs strategists led by Kamakshya Trivedi, though, argued that Brazilian stocks will benefit from increased demand for risky assets and a rebound in commodities prices over the second half of the year
“We think Latin America offers the most value in EM equities – Bovespa likely the best rebound candidate,” Goldman Sachs strategists said in a note. “Latin America’s underperformance versus the rest of EM since January has opened up significant value across assets on both a relative and an absolute basis.”
Brazil’s economy has struggled for growth in recent years. Brazil also has massive pension issues. For example, Brazil’s current retirement age is 60 for men and 55 for women which has has put a strain on the system. But global investors think Bolsonaro will make the changes necessary to help and grow the country’s economy again.
One way to play Brazil and Goldman Sach's recommendation is through the most popular Brazilian ETF, iShares MSCI Brazil. So can the EWZ go higher, lets go to the charts to find out?
Monthly Chart (Curve Timeframe) - Monthly demand is at $19 and monthly supply is at $56.
Weekly Chart (Trend Timeframe) – the trend is down, but has stalled out.
Daily Chart (Entry) – price is consolidating and may have bottom, so a break out to the upside with a pull back to go long since price is near the monthly demand at $19.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
