Last week, Emerging Market Equity Fund Flows were down for the 4th straight week with the largest outflows seen since the August 2011 bloodbath.
In Brazil they just conducted a swap operation to try and support t the currency as the Brazilian real moved to 2.16 intra-day lows before the operation.
Brazilian real (BZF, quote) unable to hold its gains after removal of the IOF tax. After being 1.4% higher this morning, the currency is almost flat. This lack of follow through on removing a tax that was major news when they announced it is disappointing but not surprising on both a Brazil level and an emerging market level overall.
With an aggressive 50bp hike in the COPOM rate, the Brazilian Central Bank (BCB) may have put the brakes on the runaway train that was the Brazil Reel (BRL) this week.
Petrobras (PBR, quote) issuing $11 billion in debt to set a record for an emerging markets debt offering. The company is using the opportunity of negative real rates in Brazil (officially no, but in terms of true cost of living, YES), and most of the world to tap a global debt market starving for yield.
In a topic which could be discussed at great length beyond this forum, I would at least like to sketch the surface of a concept I think many investors (including me) are having trouble with.
We continue to see a powerful breakout in Brazil and with net short Ibovespa futures >$3.5B there is room for additional move.