This country's stocks prove to be one of the best ETF bets

This country's stocks prove to be one of the best ETF bets

Chamber Articles Category: Trade News Post Date: 02/17/17 Source: CNBC By: Rebecca Ungarino
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A popular Brazilian equities-tracking exchange-traded fund has surged 103 percent in the past year, making it one of the best-performing large U.S.-listed ETFs.

And some equity strategists see even more room to run for the iShares MSCI Brazil Capped ETF (EWZ).

"We're in the camp that the stocks are overbought, but they're in a multiyear bull market," Larry McDonald, head of global macro strategy at ACG Analytics and editor of The Bear Traps Report, told CNBC on Thursday.

The EWZ surged 61 percent in 2016, as oil and other commodities exported by Brazil enjoyed huge bounces, and economic optimism rose following former President Dilma Rousseff's impeachment.

McDonald, who correctly called for a Brazil rally at the end of 2015, said several factors could hurt the country's equities this year. A stronger U.S. dollar stands to hurt emerging markets, in which Brazil is included, and with elections coming up in 2018, political uncertainty could stand to take the equities off their course higher.

At the same time, if the country's central bank cuts interest rates again this year "by another 300 basis points, that's really good for stocks." At this juncture, he would recommend buying dips in Brazilian equities.

Brazilian stocks are likely to see more upside, agreed Stacey Gilbert, head of derivative strategy at Susquehanna.

"I do think it'll continue until, as we always say, until it doesn't continue. But I can say from a sentiment perspective, investors are still setting up that it will continue," Gilbert said Wednesday on CNBC's "Trading Nation."

In terms of fund flows, Gilbert noted, the EWZ has so far this year seen just under $200 million — roughly 20 percent of what the fund saw in all of 2016.

"So we're still seeing new money move into EWZ. What's interesting on the options side ... they've gone very quiet," Gilbert added. Read Full Article