Two new Brazilian ETFs launched: consumers and financials

 Global X has added yet two new ETFs to cover Brazil: BRAQ and BRAF. They are attractive because they hold many companies that do not have ADRs that trade in new York.

 Note that we track all the spectacularly performing Brazilian ETFs live here.

BRAQ:

Brazilian consumers 

• MER: 0.77%

Brazil’s  consumer  sector  is  expected  to  take  an  increasingly  important  role  in driving economic growth. According  to IBGE  and  BMI  forecasts  for  private  fnal  consumption,  the consumer sector growth rate is expected to outpace the country’s overall economic growth rate. The government has steadily increased the national minimum wage over the  last few years. This has  led to a rapid reduction in extreme poverty and in turn created a larger consumer base for the food, drink, and retail sectors. The 2014 FIFA World Cup, followed by the Olympic Games in Rio de Janeiro in 2016 are also set to promote investment into sectors that traditionally beneft from major sporting events, including beer, soft drinks and retail, with these events representing an opportunity for Brazil as both an  investment and tourist destination. A steady decrease in unemployment since 2004 combined with growing  real wages  and  size of  the middle  class have contributed to higher disposable incomes and should continue to do so. Retail sales are expected to grow 9.5%  in 2010, on  low unemployment rate, expanded household income, and strong availability  of  credit.  Falling  poverty,  swelling middle  class, and rising affuence of consumers also contribute to growth in retail spending.

Top holdings:

• Lojas Renner S.A. 5.13%
• Gafsa S.A. 5.06%
• JBS S.A. 4.81%
• Lojas Americanas S.A. 4.81% 
• Companhia Brasileira de Distribuição 4.76%
• Souza Cruz S.A. 4.74%
• Multiplus S.A. 4.74%
• Companhia de Bebidas das Americas 4.70%
• Anhanguera Educacional Participacoes S.A. 4.64%
• BRF Brasil Foods 4.57%

BRAF:

Brazilian financial companies

• MER: 0.77%

The amount of commercial  lending among Brazilian banks  far exceeds corresponding lending activity in other Latin American countries. Loan portfolio values in Brazil in Q3 2009 were fve-fold greater than that of second-ranking country, Mexico. Dealogic reported 156 Brazilian M&A deals worth $37.8 billion in Q1 2010, nearly double  the $19.1 billion over 81 deals posted  in Q1 2009. Estimates  indicate  that M&A activity continues  to grow quickly and totals for 2010 will be high. Itaú Unibanco predicts fnancial investments will surge to a rate of growth  around 22% each  year out  to 2020. The  civil, urban,  and  commercial expansion planned in advance of the 2014 FIFA World Cup and the 2016 Rio Olympic Games will have an impact on this growth in part. Historically,  the  Brazilian  government  began  revolutionizing  its
banking system under the Proer Restructuring Program in 1995. The program implemented a set of measures that allowed the Central Bank to enhance the oversight of fnancial Institutions, whereby weak  fnancial  institutions  were  required  to  either  increase  their capital,  transfer  shareholder  control,  or  be  acquired  by  another bank. As  result,  the  strength  of  the  Brazilian  fnancial  system  was  enhanced. Instruments were developed to avoid future fnancial crises. As a refection of this strengthening, the number of checking and savings  accounts  in  Brazil  has  been  increasing  steadily  since  the early 2000’s.

Top Holdings:

• Itaú Unibanco Holding S.A. 10.29%
• Banco Bradesco S.A. 10.47%
• Banco do Brasil S.A. 10.09%
• BM&FBOVESPA S.A. 4.27%
• Cielo S.A. 4.35%
• Redecard S.A. 4.03%
• Banco Santander (Brasil) S.A. 5.20%
• Cyrela Brazil Realty S.A. EMP 4.89%
• PDG Realty S.A. 5.00%
• MRV Engenharia 5.46%