Coming into 2013 there were lots of bulls recommending getting exposure to the Brazilian stock market. They were rewarded this past week as EWZ rose over 4% which came on the heels of strong economic data. This time last week EWZ was actually down on the year and despite a strong week EWZ continues to lag other market indexes. VXEWZ dropped over 8% on the week, but remains at a premium to the other three tradable equity index volatility markets (VXEEM, VIX, and VXN). This premium could be a result of the market lagging, concerns about inflation in Brazil which often accompanies a pickup in economic activity, or the continued outflows that the EWZ exchange traded fund is experiencing.
EEM has a solid week as well moving up by about 2%, but remains in the red for 2013. VXEEM dropped by over 18% and the futures curve moved down across the board. The EEM exchange traded fund has experienced net withdrawals in 2013 despite being basically flat on the year. VXEEM is at a historically low level which indicates volatility traders believe the lower volatility (and possibly higher EEM) is on the horizon.