Every journalist knows that, if no news is good news, good news is also no news, generally. That’s human nature, not some diabolical dictum of the mass media. War breaking out is inherently more interesting than peace prevailing. One plane crash fascinates more than a million safe flights.
This dynamic is much in evidence around Covid-19 and emerging markets just now. Hair-raising stories from India have grabbed the world’s attention, justifiably so as they spurred rapid political action. But the country that was Covid Horror Central a few weeks ago, Brazil, is getting demonstrably better, under most radar. Seven-day case averages are down 25%, and deaths 20%, from peaks in late March, according to gold-standard Johns Hopkins data.
Markets are paying more attention than newsrooms. The iShares MSCI Brazil ETF (ticker: EWZ) has rallied 12% over the past month. But Brazil could still offer bargains from finance to tech if positive trends continue.
More important on a cosmic scale is that Brazil may be turning the Covid corner without any real policy overhaul: Common sense, aided by an obstreperous free press, is gaining ground on a bullheaded president. Power is devolving to the state level, where it should be more effective. The vaccine campaign is accelerating after grinding some bureaucratic gears. All these factors could soon come into play in stricken India as well.
India and Brazil have many differences. What they have in common is cocksure national leaders who have done grievous harm since the pandemic arrived. Brazilian President Jair Bolsonaro is a willfully ignorant Covid denier in the Donald Trump mode, who called the pandemic “a little flu” and suggested vaccines could make women grow beards.
Indian Prime Minister Narendra Modi is a much more serious man. His serious decisions may have had worse consequences than Bolsonaro’s clowning. He launched a nationwide lockdown last year with virtually no warning, stranding millions of migrant workers with neither work nor means of returning home. This year, deciding the pandemic was no longer a threat, he encouraged 1.4 billion Indians to resume super-spreader events, not least mass rallies for his BJP Party. That fueled the current cataclysm.
Modi sounded chastened, not a usual condition for him, when he belatedly addressed the nation last weekend, and inclined to learn from some mistakes. He left lockdown decisions to states and localities this time around, and urged them to vaccinate migrant laborers first so they could stay where they are. He stopped short of banning mass gatherings, but seems to have taken his foot off the electoral pedal.
Some of the two nations’ differences are in Brazil’s favor, aside from being ahead in the Covid second-wave cycle. It’s a much richer country than India, with more than twice the GDP per capita. It has one-sixth as many citizens to vaccinate. It actually boasts a crack epidemiological service, which once administered 10 million polio vaccines in a single day. And its stocks are much cheaper.
The average price/earnings ratio for the Brazil ETF is around 19, compared to 31 for the iShares MSCI India ETF (INDA). Even that lagging figure is skewed upward by Vale (VALE), the biggest Brazilian index component, which has jumped by a third over the past six months based on surging prices for its iron ore. Big banks like Itau Unibanco (ITUB) remain in deep value territory, down 15% year-to-date. High-growth tech names like competing payment systems Pagseguro (PAGS) and StoneCo. (STNE) are off more than 20% from early March peaks.
Surer than the stock-picking right now is the appropriatness of some hope. Covid is demonstrating, most dramatically in Brazil and India, that it won’t disappear as quickly or easily as many had hoped. It won’t stick around as long as many now fear either.