Brazil ETF Jumps 14% as Flávio Bolsonaro Tops Round One

Markets: Brazil

Brazil’s main US-listed fund, EWZ, rose 14.0% in the five sessions after Flávio Bolsonaro finished first in the presidential vote on 4 October. For Americans who hold Brazil through ETFs or Petrobras shares, the 25 October runoff now decides whether that jump holds. The rally was not uniform: Petrobras surged, Vale did not.

What Moved After the Vote

Brazil voted on Sunday 4 October. Markets reacted on Monday 5 October. The Ibovespa, the main São Paulo stock index, closed at 206,912 points, up 7.7% on the day and a record close.

In New York, EWZ gained 12.5% that Monday, from US$38.19 to US$42.98. It ended the week at US$43.54. The Ibovespa finished Friday 9 October at 209,067 points, 8.8% above its 2 October close.

The Petrobras ADR rose from US$21.65 to US$25.30 (+16.9%) over the same week. The Vale ADR went the other way, from US$13.76 to US$13.62 (-1.0%). An ADR, or American depositary receipt, is a certificate traded in New York that represents shares of a foreign company.

Currency mattered too. The dollar fell from R$5.21 to R$4.99 (-4.2%), according to RT data. A stronger real lifts what a US investor earns in dollars. That is why EWZ, up 14.0% in dollars, outran the Ibovespa, up 8.8% in reais.

EWZ daily chart to 9 October 2026. The gap on the right is the jump after the first round. (Rio Times chart, RT data)

Why Investors Cheered Flávio Bolsonaro’s Lead

The first-round result beat expectations. The final AtlasIntel poll had put Lula ahead, 47.0% to 44.1% of valid votes. The electoral court TSE reported the opposite order: Flávio 47.03%, Lula 45.16%.

Fund managers quoted by Bloomberg Línea tied the rally to public finances. Daniela Da Costa-Bulthuis of Robeco, an asset manager, told Bloomberg Línea that Flávio is seen as the better option for investors and that fiscal consolidation would give the central bank room to keep cutting rates.

Those rate cuts are already under way. The central bank lowered the Selic benchmark rate by 0.25 points to 13.75% in September, from 14%. Lower rates tend to help Brazilian stocks and ease debt costs. The next Copom decision is on 4 November.

J.P. Morgan raised Brazil equities to “overweight” on 5 October, according to market reports. That is a bank view, not a Rio Times forecast.

What Prediction Markets Say

Traders on Polymarket and Kalshi see Flávio Bolsonaro as the clear favourite for 25 October. Kalshi is regulated in the US by the CFTC. The box below shows the latest prices.

How the Dollar Return Is Built

A US investor in Brazil earns two things at once: the change in share prices and the change in the real. Last week both pointed up for EWZ. Simple arithmetic shows why: a rise of 8.8% in reais, combined with a dollar that is 4.2% cheaper, comes to roughly 13.6% in dollars, close to the 14.0% EWZ delivered.

The same link works in reverse. If Lula wins on 25 October and the real weakens, a dollar investor loses on both legs. If Flávio wins, the market has partly priced it already.

An office tower on Avenida Paulista, São Paulo’s financial avenue. (File photo)

What Could Reverse the Rally

Three things stand out. First, the race is close: Datafolha’s 8 October poll gave Flávio 52% to 48% of valid votes, a lead that the 2-point margin of error leaves in doubt. Second, Flávio has not yet presented detailed fiscal plans, according to Bloomberg Línea. Third, prices already reflect good news, so a poll that narrows could hit them.

Dates to watch: US inflation data on Wednesday 14 October, Brazil’s mid-month inflation index (IPCA-15) on Friday 23 October, the runoff on Sunday 25 October and the Copom decision on Wednesday 4 November. September’s IPCA-15 was 4.47% over 12 months.

What It Means for You

If you hold EWZ, Brazilian ADRs or a global emerging-markets fund, part of this week’s gain came from the real, not from companies. That part can reverse in a day. Check how much of your fund is Brazil and plan for a volatile 25 October. This article is not investment advice.

What Is Not Known

It is not known whether the rally prices in a Flávio win already, or whether more upside remains. Prediction markets favour him, but polls show a close race. His economic team and spending rule are also not yet detailed.

Frequently Asked Questions

What is EWZ?

EWZ is the iShares MSCI Brazil ETF, an exchange-traded fund that trades in New York and holds large Brazilian companies. It closed at US$43.54 on 9 October 2026, up 14.0% from US$38.19 on 2 October, the last close before the first round.

Why did Brazilian assets rise after the first round?

Flávio Bolsonaro took 47.03% of valid votes against 45.16% for President Lula on 4 October, better than the polls had suggested. Fund managers said investors expect tighter public spending and room for further interest-rate cuts.

When is the Brazil runoff?

The runoff between Flávio Bolsonaro and Lula is on Sunday 25 October 2026. The Datafolha poll of 8 October had Flávio on 49% and Lula on 45%, a close race given the poll’s 2-point margin of error.

How do US investors get exposure to Brazil?

Many use New York-listed funds such as EWZ or American depositary receipts (ADRs), which are US-traded certificates for shares of foreign companies, such as Petrobras and Vale. Returns in US dollars also depend on the real’s exchange rate. This is not investment advice.

What do prediction markets say about the runoff?

Prediction markets on Polymarket and the CFTC-regulated Kalshi price a Flávio Bolsonaro win as the clear favourite. The live prices are in the box above; they are bets, not polls.

When does Brazil’s central bank decide on rates next?

The Copom monetary policy committee meets on 3 and 4 November 2026. It cut the Selic benchmark rate by 0.25 points to 13.75% in September.