Things Are So Bad In Brazil, One Of Its ETFs Is Closing

Exchange traded funds tracking Brazilian stocks are getting some much-needed relief today on news the embattled government there will intervene to stem the fall of the real, the Brazilian currency.

 

That might be too little too late for some Brazil ETFs, notably the Global X Brazil Financials ETF BRAF. New York-based Global X, the issuer of the Global X Brazil Financials ETF, said in a statement it will close BRAF and three other ETFs next month. 

 

Joining BRAF in the to-be-closed bin are the Global X Junior Miners ETF JUNR, the Global X Guru Small Cap Index ETF GURX and the Global X Central Asia & Mongolia Index ETF AZIA. The Global X Central Asia & Mongolia Index ETF, which debuted in 2013, was known for being the ETF with the largest allocation to Mongolia.

 

The four ETFs being closed by Global X have less than $8 million in combined assets under management, representing a scant percentage of the $3.1 billion in ETF assets held by Global X as of Sept. 24.

 

“Shareholders may sell their holdings in each Fund prior to the end of the trading day on October 8, 2015 and customary brokerage charges may apply to these transactions. The Funds will cease trading at the end of the trading day on October 8, 2015, no new creation units will be sold for any Fund after that time, and each Fund will liquidate on or around October 22, 2015,” said Global X in the statement.

 

In the case of BRAF, the Brazilian financials ETF, that ETF has tumbled 36 percent year-to-date and has lost 57 percent of its value over the past 12 months. BRAF is off more than two percent today on volume that is more than triple the daily average.

 

Despite some of the world's highest interest rates, emerging markets or otherwise, Brazilian banks have struggled to increase profitability as the real has plunged and global commodities has plummeted. Itau Unibanco S.A. ITUB, Banco Santander Brasil S.A. BSBR and Banco Bradesco S.A. BBD have an average price tag of less than $5.10 at this writing.

 

Those are BRAF's largest U.S.-listed holdings and the stocks combine for over 29 percent of the ETF's weight. Approximately 80 ETFs have been closed this year, but more than 200 new ETFs have come to market.

Posted In: brazilBrazil ETFsBrazilian ETFsSector ETFsShort IdeasEmerging MarketsEmerging Market ETFsMarketsTrading IdeasETFs

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