This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Brazil Knocks China Down a Few Rungs

Stocks in this article: VALE EWZ PBR

NEW YORK ( TheStreet) -- Emerging Global Shares has started selling the INDXX Brazil Infrastructure Index Fund (BRXX), its second country-specific infrastructure exchange traded fund. The ETF is more useful than the iShares MSCI Brazil Index Fund (EWZ) and overshadows China.

Brazil, as one of the BRIC countries -- Brazil, Russia, India and China -- is a popular investment destination, its benchmark stock-market index having quadrupled in the past decade. Brazil's catalyst is that it has stuff (natural resources) that other countries (such as China) need. The mining boom means Brazil is getting richer, resulting in the improvement of living standards for Brazilians. There's a burgeoning middle class and a modernization of infrastructure. This is happening in many countries around the world. The difference is Brazil's place in the process.

The country isn't without risks. It needs to put a cap on inflation, which requires high interest rates. President Luiz Inacio Lula da Silva, who has been at the helm during the boom, will be stepping down after the election scheduled for Oct. 3.

There are other risk factors too. The Brazilian stock market is up almost 75% in the past year, and the government is concerned about "too much, too fast," prompting it to institute a 2% tax on investment flows to stem currency appreciation. Given that the Brazilian real is up 24% against the U.S. dollar in the past 12 months, it's possible that the Brazilian government may take more extreme actions to stem currency volatility.

When U.S.-based investors consider picking an emerging-market country, Brazil and China are on the top of the list. Brazil, however, offers fundamental advantages that could be important in the next few years. China, in contrast, has become much riskier and controversial. There is visibility for mismanaged growth in terms of loan growth and real estate development, creating capacity that can't be filled. There are also concerns with residential property speculation (despite much higher down-payment requirements than in the U.S.).

In short, China has a lot of moving parts, far more than Brazil has. Part of the appeal of investing in emerging markets is that they're simpler than the U.S. China is on the road to being very complex, but not so Brazil -- not yet, anyway. From the top down, Brazil is a proxy for natural resources, and I believe that will continue to be the case for a long time even as the middle class grows and life improves.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs