Brazil Trade Reverses as Foreign Investors Rush for the Exit

Brazil went from one of the world’s hottest trades this year to one of the weakest in a matter of days.
The Ibovespa fell 3.2% this week while the Brazilian real dropped 2.7%, as foreign investors pulled roughly $2.6 billion from Brazilian equities.
The iShares MSCI Brazil ETF $EWZ also recorded its worst week of outflows in 13 years.
The reversal highlights the risk of crowded carry trades: once sentiment turns, investors can rush for the exit at the same time.
A single election-related headline was enough to trigger a sharp unwind across Brazilian stocks and the currency.
When positioning gets this crowded, the exit door can quickly become too small.