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Remember the good old days? You know, when emerging ETFs were all the rage and an investor could just pick an ETF with the emerging markets label, do little homework beyond that and the fund would probably go up. Obviously, 2011 changed that way of doing business.
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The good news is with the substantial declines endured by myriad emerging markets ETFs in 2011, there are now plenty of rebound candidates. Some are widely known, others fly under the radar. One fund that fits into the latter category is the Global X Brazil Financials ETF (NYSE: BRAF).
Yes, we know what you're thinking. "Bank stocks and Brazil in one ETF? Sounds risky." It was in 2011 and the slide in Brazilian equities has forced the Global X Brazil Financials ETF to 20.2% decline in the past year.
BRAF has been around since July 2010 and has managed to accumulate over $5.4 million in assets under management during that time. It is the only ETF devoted exclusively to Brazilian financial services companies, which validates it as a sound option for the investor that's looking to bet on a Bovespa rebound.
BRAF's top three holdings are probably familiar to U.S. investors that follow Brazil. Itau Unibanco (NYSE: ITUB), Banco Santander Brasil (NYSE: BSBR) and Banco Bradesco (NYSE: BBD) account for about a third of BRAF's weight.
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It's not unreasonable to say any or all of that trio offers less risk and more potential than a stock like Bank of America (NYSE: BAC). Beyond that, while Brazil has had its hands full with inflation issues, the country's housing market remains robust.
Should Brazil's central bank move to lower interest rates in 2012, a frequent topic of speculation, that could help fuel a rebound in stocks like Banco Santander Brasil, homebuilder Gafisa (NYSE: GFA) and BRAF.
Here's the bottom line: BRAF's chart is improving and the ETF just cleared important technical resistance. If BRAF can tack on another 4.4% to reclaim its 200-day moving average, the ETF becomes that much more compelling and could be shaping up for a run back to the $17-$18. Of course, we cannot forget to mention BRAF's dividend yield of over 4.8%. Remember, when it comes to Brazil ETFs, it's not always all about the iShares MSCI Index Fund (NYSE: EWZ).
