Global emerging market funds invest record $42.4 billion in Brazil stocks

Global emerging market stock funds tracked by Copley Fund Research entered October ​with a record $42.4 billion invested in Brazil, pointing to ‌increased exposure ahead of a volatile election eventually ​won by incumbent Luiz Inacio Lula da ⁠Silva.

* Brazil had more money committed to it by managers, relative to its share of the market benchmark, ‌than any other country in a sample of 353 actively managed global emerging market equity ‌funds overseeing $697 billion.

* Nearly three-quarters of funds ‌were ⁠overweight Brazil, the highest proportion for any ⁠country. Almost all of the funds, 98.6%, owned at least one Brazilian stock.

* Brazil accounted for an average 5.85% of ​portfolios, behind Taiwan, South Korea, ‌China/Hong Kong and India. The country's weight in the widely followed MSCI EM index was 4.09% at the end of last month.

* Brazil's benchmark ‌stock index rose 7.7% the day after right-wing ​candidate Flavio Bolsonaro unexpectedly won the first-round vote, and fell almost 14% the day ⁠after Lula won the runoff.

* Managers whose portfolios differed most from the index allocated roughly twice as ‌much to Brazil as the passive benchmark.

* Brazil became a smaller slice of portfolios between March and September, but investors had barely pulled any money out. The effect came largely because surging semiconductor stocks in South Korea and Taiwan made those markets ‌a bigger part of portfolios, according to Copley. Estimated withdrawals ​from Brazilian stocks exceeded purchases by just $37 million, against $42.4 billion invested. Buyers slightly outnumbered ⁠sellers, 142 funds to 136.

* Investors were shifting money ⁠within Brazil, favoring materials companies over makers of everyday consumer goods. Between March and September, materials ‌stocks attracted an estimated $337 million in net purchases. Consumer staples stocks saw $266 million in net selling, ​the data showed.