Forget about China and Brexit. This Country’s on the Move

Forget about China and Brexit. This Country's on the Move

Brazilian stocks are ripping today as its government prepares for a huge legal change.

Lawmakers in Brasilia are set to overhaul the country’s pension system, considered the biggest weight on its finances. The reform would save about $200 billion over a decade by raising contributions and the minimum retirement age.

The iShares MSCI Brazil ETF (EWZ) rose almost 3 percent by mid-afternoon and is one of the top performing funds in the market today. Some Brazilian companies are also making big moves:

  • Petrobras (PBR): The large oil and gas company is up about 5 percent. It’s also seeing a flurry of options activity, with more than 70,000 contracts changing hands today — more than twice the daily average.
  • Bando Bradesco (BBD): The country’s No. 2 bank is up 5 percent.

The pension overhaul has been the most important story in Brazilian stocks since outsider Jair Bolsonaro unexpectedly won the presidential election last year. It’s bounced around the legislature for months but now appears to be nearing passage.

Petrobras (PBR) chatrt with 1-day changes and call volume.
Petrobras (PBR) chatrt with 1-day changes and call volume.

It’s a potential opportunity for investors because Brazil is Latin America’s biggest economy, with the most stocks listed on U.S. markets. The reform could help spur a pro-business turn following almost two decades of leftist control.

In conclusion, global investors have focused almost entirely on Chinese trade and Britain’s potential exit from the European Union. But now another story is flying onto their radar screens from South America.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.