Brazilian stocks were set to crash on an emerging scandal involving the country’s recently installed president.
The iShares MSCI Brazil Capped ETF (EWZ), a heavily-traded U.S. ETF that tracks Brazilian stocks, crashed more than 17 percent in the premarket Thursday
Less than 10 months into the new administration, Brazilian newspaper O Globo reported late Wednesday that Brazilian President Michel Temer gave his blessing to an attempt to pay a potential witness to remain silent in the country’s biggest-ever graft probe.
EWZ 5-day performance (extended hours)
O Globo’s report, which they say three sources familiar with the matter said was accurate, threatened to pull
“We believe the administration’s economic team is highly concerned the crisis will impact their reform agenda,” Larry McDonald wrote Thursday in “The Bear Traps Report” newsletter. “Equity prices / valuations are very dependent on completion / passage of these reforms.”
The iShares MSCI Emerging Markets ETF (EEM) fell more than 2 percent in premarket trade.
The Brazilian Bovespa opens at 9 a.m., ET.
Brazilian equities have surged over the past year, with the EWZ rising more than 45 percent in the period, as investors cheered
The new president and his promised reforms were supposed to turn the page on Brazil’s rocky political climate. Temer became leader of the country after President Dilma Rousseff was removed Aug. 31 amid a massive corruption scandal and an economic crisis that crippled Latin America’s largest country.
“Now the fear is that
Brazil had been an economic stalwart in the region just a few years before Rousseff’s impeachment, buoyed by surging oil prices. But the collapse
—Reuters contributed to this report.