Brazilian Stocks drop more than 10 percent in opening trade on Thursday.
According to reports, Brazilian stocks fell more than 10 percent in opening trade Thursday due to the latest political scandal involving the country’s recently installed president.
Brazilian newspaper O Globo reported late Wednesday that Brazilian President Michel Temer gave his blessing to an attempt to pay a potential witness to remain silent in the country’s biggest-ever graft probe, after only ten months in office.
The iShares MSCI Brazil Capped ETF (EWZ), a heavily traded U.S. exchange-traded fund that tracks Brazilian stocks, briefly dropped more than 18 percent in morning trade and was tracking for its worst day since October 2008.
The Brazil Bovespa recovered to trade about 9 percent lower, also tracking for its worst day since Oct. 22, 2008.
Brazil’s top court opened a probe on Brazilian President Michel Temer, Bloomberg reported in early afternoon trade, citing GloboNews.
The president told lawmakers Thursday that his government would not be toppled by allegations he was caught on tape trying to buy the silence of a potential witness in a sprawling graft investigation, according to various reports.
Temer’s office on Wednesday admitted he had met in March with the businessman, Chairman Joesley Batista of meat giant JBS SA, but denied any part in alleged efforts to keep jailed former House Speaker Eduardo Cunha from testifying.
According to various reports, O Globo’s report threatened to pull Temer into a corruption scandal that has already entangled several of his closest allies and advisors.
The following are U.S.-listed shares of major Brazilian stocks that have fallen:
- Petrobras- down more than 14.5 percent.
- Banco Bradesco- down more than 18 percent.
- Vale SA- down nearly 8 percent.
- Itau Unibanco- down 14.5 percent.
Brazil makes up 7.43 percent of the MSCI Emerging Markets Index, as of April 28. China is the country with the greatest weighting, at 27.05 percent. The iShares MSCI Emerging Markets ETF (EEM) briefly fell more than 2 percent.
Argentina, which defaulted on $1.3 billion in debt in 2014, trades the most with Brazil. Argentina’s Merval stock index briefly fell more than 4 percent, on track for its worst day since Nov. 10.
The Brazilian real fell more than 6 percent against the U.S. dollar Thursday morning.
The new president, Temer, and his promised reforms were supposed to bring positive change to the largest Latin American country. Temer was installed as the new leader after President Dilma Rousseff was removed Aug. 31 amid a massive corruption scandal and an economic crisis.
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