NEW YORK (The Street) -- Brazil has been a hot ticket among emerging markets and has recently won the bid for two major sporting events, which will most likely further boost its already-booming economy.
The South American nation has been selected to host the 2014 World Cup Soccer Championship as well as the 2016 Summer Olympics. A combination of these two sporting events will likely spark a demand and surge in infrastructure in that the facilities needed to host the events have still not been built, and when these facilities are built, an investment catalyst will likely result.
To add to its attractiveness, consumer spending constitutes a big part of the country's success, which means that it is not the government that is dumping hoards of cash into the economy to keep the nation afloat. Additionally, the government mandates that subsidized loan rates on homes and appliances be underwritten by state-owned lenders, which adds to the stability of the nation's financial system.
Thirdly, interest rates in Brazil are at 8.5%, marking the lowest they have ever been in real terms, which makes borrowing more attractive and further stimulates the economy. Lastly, Brazil's public-sector jobs continue to grow and welfare payments have been increased by 30%, indicating that the nation's government is growing and is well funded.
In addition to all of the aforementioned reasons, Brazil offers something that many others don't: It has vast resources that the rest of the world not only wants, but needs. As supply-and-demand forces put price pressures on these resources, and eventually drive their prices up, the revenue generated will make the nation richer and further strengthen the nation's financial assets.
In conclusion, the winning bids that brought the World Cup and Summer Olympics to Brazil will just add to an already-attractive nation. Here are some ways investors can play the Brazilian markets:
- iShares MSCI Brazil (EWZ) - Get Report, which is heavily concentrated in materials and financials and will likely benefit from infrastructure building. The ETF is up 112% from a $31.75 low in March to close at $67.30 on Friday.
iShares MSCI BRIC (BKF) - Get Report, which allocates nearly 31% of its assets to Brazil. The ETF closed at $40.86 on Friday from a March low of $20.47, an increase of 99.6%.
When investing in equities, it is imperative to keep in mind the inherent risks that are involved. To help mitigate these risks, an exit strategy is of utmost importance. According to the latest data from
, an upward trend in the previously mentioned equities may come to an end at the following price points: EWZ at $64.02 and BKF at $39.38. These price levels change on a daily basis and updated data can be accessed at www.SmartStops.net.
Written By Kevin Grewal In Laguna Niguel, Calif.
Kevin Grewal is an editorial director and analyst at SmartStops.net where he focuses on mitigating risks and implementing exit strategies to preserve equity. Prior to this, he was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.