Emerging Markets Funds & Emerging Markets etf

It is quite initeresting why not to buy Brazil now given that Brazil is a well known emerging market with many emerging market funds and emerging market etfs links.  The company Petrobras has been a good performer as a result of dealings with BG Group in the Santos Basin. And recently President Lula made the state controlled Petrobras the operator for all developments that are deemed strategic – ie big and profitable.  This is effectively ‘resource nationalisation’ or protectionism.

This is bad for the economy as a whole but good for Petrobras.  The Brazilian Real has performed really well (forgive the pun) but Societe Generale believe it is overvalued. This could mean a decline in the value of a holding of Petrobras.  So this could be a reason not to buy Petrobras at present, although long term its value looks good. so while Petrobras looks good on valuation terms it is not so good value because of the high currency, which could well fall.  And this reasoning applies to other brazilian stocks as well and why not in buy Brazil now. So if you do want to buy into Brazil, wait for the currency to fall between 12 and 25%.