Brazil ETF receives biggest investment in 5 years after Trump-Lula meeting

(Bloomberg) — An exchange-traded fund (ETF) that buys Brazilian stocks saw inflows for the first time since July and at a pace not seen in more than five years, as trade tensions with the U.S. began to show signs of easing.

Investors invested more than US$285 million (R$1.5 billion) in (EWZ), which has US$5.85 billion (R$31.3 billion) in assets, this being the first weekly inflow since US President Donald Trump announced 50% tariffs on the Latin American country on July 10. It also marks the largest weekly inflow into the ETF since December 2019.

Brazil ETF records biggest weekly inflow since 2019

It also marks the first positive flow in three months

Trump and Brazilian President Luiz Inácio Lula da Silva met backstage at the United Nations General Assembly on September 23 and spoke by phone on Monday morning, their first meaningful conversations in months.

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“The Trump-Lula meeting at the UN was probably the driver of the flows, but I also think those flows are still somewhat cautious,” said Brendan McKenna, emerging markets economist and currency strategist at Wells Fargo. “The direction is positive, but until we make progress, flows may remain limited.”

During the call, which Brazilian Finance Minister Fernando Haddad called “positive,” the leaders agreed to hold an in-person meeting soon. Lula also asked Trump to remove tariffs on the country’s products and sanctions against senior officials.

The tariffs — along with sanctions on a Supreme Court judge — were part of an attempt by Trump to impede the trial of former President Jair Bolsonaro, convicted on charges of an attempted coup in September.

“Certainly a step in the right direction, although no agreement on tariffs has been reached,” said Dan Pan, economist at Standard Chartered Bank.

Pan also notes that markets have remained focused on domestic and monetary policies as the US Federal Reserve recently began its easing cycle. Signs that Brazil’s Central Bank will begin cutting the Selic rate next year also boosted local shares.

The EWZ, as the ETF is known, is up 34% so far this year, outperforming the broader MSCI Emerging-Market Equity Index, which is up 27% over the same period. Latin American stocks are also on the rise, with the MSCI EM Latin America index recording a 34% advance as of Monday.

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Elsewhere, inflows into U.S.-listed emerging market ETFs, which invest in various developing nations as well as those that focus on specific countries, totaled $1.89 billion in the week ended Oct. 3, compared with gains of $1.33 billion the week before, according to data compiled by Bloomberg. So far this year, inflows have totaled US$26.2 billion.

• Stock ETFs grew by $1.44 billion.
• Bond funds rose $446.3 million.
• Total assets rose to $454.3 billion from $441 billion.
• The MSCI Emerging Markets Index closed up 3.6% from the previous week at 1,373.89 points, the highest level since June 30, 2021.
• China/Hong Kong had the largest inflow, of US$694.6 million, led by Invesco China Technology.
• Argentina had the largest outflow, at US$34 million, following withdrawals from Global X MSCI Argentina.

Note: Numbers are calculated by country weight using flows to US-listed ETFs. Bloomberg updated screening criteria in November 2024. Use Bloomberg screening tools to create custom filters.

Below, tables detail net flows into emerging market ETFs in US dollars. The data includes holdings-weighted allocations of multi-country funds as well as country-specific funds.

The most recent and historical flows are allocated using the most recent fund weights (amounts in millions of dollars unless otherwise noted):

Regional data

Americas

Asia-Pacific

Europe, Middle East and Africa

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