EWZS: New Brazil Small Cap ETF from iShares

September 30, 2010 by  
Filed under Commentary, ETF IPOs (New ETFs), ETFs

The iShares MSCI Brazil Small Cap Index Fund (EWZS) was launched September 29, 2010 with an objective of capturing Brazil’s small cap stock performance.  The underlying MSCI index is a free-float adjusted market capitalization weighted index designed to measure the performance of the bottom 14% (by market cap) of equities listed in Brazil.

According to the EWZS fact sheet (pdf), there are 79 constituents in the underlying index and the fund currently holds 78 of them.  The largest holdings include Diagnosticos da America 6.7%, TOTVS 4.8%, Anhanguera Educacional 4.3%, Cia Hering 4.0%, and CETIP SA-Balcao Organizado 3.8%.

Sector breakdown for the index as of 8/31/10 was Consumer Discretionary 26.1%, Industrials 18.6%, Financials 16.8%, Health Care 12.2%, Technology 7.9%, Utilities 7.8%, Materials 5.0%, Consumer Staples 4.8%, and Energy 0.7%.  An expense ratio of 0.65% for the fund is indicated on the EWZS overview.

There is zero overlap between the holdings of EWZS and its large-cap sibling iShares MSCI Brazil Index Fund (EWZ) (EWZ overview page).  Sector differentiation is also prominent with EWZ’s top three (Materials, Financials, and Energy) accounting for more than 71% of assets.

EWZS will compete with the established Market Vectors Brazil Small-Cap ETF (BRF) (overview page).  BRF has gathered about $930 million in assets since its May 14, 2009 launch (launch article), and it has an identical expense ratio of 0.65%.  The underlying index for BRF has 61 constituents, a higher total market cap, and a different sector breakdown.  However, many of the top holdings of EWZS and BRF overlap, so performance could be quite similar going forward.

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

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