Things were fairly quiet for the emerging market sector as the iShares Emerging Markets ETF (EEM – 43.56) was down slightly last week. It could be all that football occupying people’s time which will continue for a few more weeks. In reality I doubt that’s the cause, but every single article these days about emerging markets or the Brazilian economy mentions the World Cup and I feel like I must align myself with the status quo. By the way, the VXEEM close of 15.08 on Friday was just 0.08 higher than the record close of 15.00 back in February of 2013.
Brazil is all about the World Cup these days, but there are also some real economic issues to focus on as well. The emerging markets column in Barron’s this weekend notes that the Brazilian economy is experiencing stagflation which is a negative. However, the Brazilian stock market has been very strong in light of the difficult economic environment. The bad news is good news has also kept VXEWZ at relatively low levels.
The quiet market resulted in a drop in VXEEM and a steepening of the VXEEM term structure curve. VXEWZ was higher last week and that curve flattened a bit. Despite positive reactions to bad news, VXEWZ may be looking beyond the World Cup when the country gets back to focusing on business.