- Country's biggest stock ETF surges most in two weeks
- Some investors see country a step closer to resolution
Brazil’s biggest exchange-traded fund jumped after the move by lower house chief Eduardo Cunha to impeach the president spurred speculation that the country’s political crisis may be a step closer to a resolution.
The iShares MSCI Brazil Capped ETF climbed 2.5 percent to $23.14 after Cunha told reporters that he accepted an impeachment request against President Dilma Rousseff. While markets in Sao Paulo had closed, American depositary receipts of state-controlled oil company Petroleo Brasileiro SA also jumped, climbing 4.4 percent.
The impeachment process could take months, involving several votes in Congress that ultimately may result in the president’s ouster. Still, it moves Brazil closer to ending a political crisis that has all but paralyzed the government amid the country’s longest recession since the 1930s and its worst budget deficit in at least two decades.
“We’ll have to see how quickly the House can get itself organized around this and impeachment trials tend to be more difficult than the people wanting them tend to believe
at the beginning," Paul Christopher, the head global market strategist for Wells Fargo Investment Institute, which oversees $1.7 trillion, said in an interview. “I would expect a short-term bounce here and then expect more grinding lower as more uncertainties are ultimately introduced."
Rousseff, who started her second term in January, has been fighting for her political survival for months, an uncertainty that has left Congress in disarray, rattled financial markets and deepened the economic slump. The political crisis has made the real the worst-performing major currency in the world this year, and set stocks on pace for a third year of losses.
“The important thing is that Brazil has a political resolution at some point over the next few months,” said Pablo Cisilino, who helps manage about $42 billion in emerging-market debt, including Brazilian bonds, at Stone Harbor Investment Partners LP in New York. “If impeachment is the way to get it, then it’ll be welcomed by the market. But there are so many twists and things that can happen between now and then.”