Brazil is a small part of the index in Emerging Markets relative to China or other Asian giants like India (EPI, quote) or Korea (EWY, quote) but it’s clear Brazil is giving investors a reason to envisage change across the asset class. 

What do we mean?

Don’t look now but the reversion to mean trades are working especially where these have been multi-year cycles that are never one way tickets. For traders the question is whether this is  now a move to face or just the beginning of a longer term recovery process that arguably is overdue regardless of challenging expectations.

I say expectations because in the case of Brazil (EWZ, quote) it has always been the combo of political impasse and fiscal dysfunction versus the expectations of no reform and no recovery in China (FXI, quote).  Well, you have a couple dynamics that are powerful even Brazil cant chart a new political/economic course for the future overnight, there is some progress from the downward spiral.  Meanwhile there is also more than stability in  commodity prices, there has been a significant uptick in pricing in oil and ore.

Let’s address the latter first:

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