Brazil ETF Leads Emerging-Market Outflows as Greece Adds to Woes

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Brazil’s biggest exchange-traded fund sank to a four-week low on concern that a possible Greece exit from the euro would deepen the largest outflows among emerging markets this year.

The iShares MSCI Brazil Capped ETF had about $800 million in withdrawals in the first six months of 2015, according to data compiled by Bloomberg. The fund extended this year’s slump to 11 percent. The Ibovespa retreated 1.9 percent to 53,014.21 at the close of trading in Sao Paulo, the most in a month.

Brazilian shares have dropped 8.7 percent from this year’s high as the nation struggles to shore up the budget and keep its investment-grade credit rating at a time when the economy is set for the worst recession in 25 years. Stocks joined a global rout Monday after Greece shut lenders and imposed capital controls, a measure that will deepen the country’s recession and risk driving it out of the euro.

“A Greek exit from the euro could mean a big disruption for global markets,” Daniel Marques, the chief analyst at brokerage Gradual, said by phone from Rio de Janeiro. “This adds to all of the concern over Brazil’s economic slowdown. In moments like this, everybody runs for protection.”

While less than 0.1 percent of Brazil’s exports went to Greece last year, some of its biggest markets are those most vulnerable to a fallout from the Greek crisis. Nineteen percent of the goods sent abroad went to the European Union, and 56 percent went to developing countries.

Bear Market

Stocks also fell as China, Brazil’s top trading partner, entered a bear market after falling more than 20 percent from its June peak. The Shanghai Composite Index tumbled as signs of an exodus by leveraged investors overshadowed the central bank’s effort to revive confidence with an interest-rate cut.

Iron-ore miner Vale SA, whose biggest export market is China, slid to the lowest in two months. The steelmaking ingredient may sink into the $30s a metric ton in the second half of the year as surging low-cost supplies from the biggest producers swamp the market, according to Capital Economics Ltd.

Petroleo Brasileiro SA followed a slump in crude prices, contributing the most to the Ibovespa’s decline. The oil producer at the center of Brazil’s largest graft probe rallied earlier Monday after announcing cuts in spending and output targets. Petrobras reduced expenses after Brent prices dropped by more than half in the past year.

Retailer Lojas Americanas SA paced losses in companies that depend on local demand after analysts covering Brazil raised their forecast for the benchmark rate at the end of this year amid above-target inflation. They cut their estimate for as Latin America’s largest economy to a contraction of 1.49 percent, according to the June 26 central bank survey of about 100 analysts published Monday.

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