Brazilian stock market is highly favored: surged 17% in January, foreign capital inflow exceeded the entire previous year, and investment giants are heavily invested

With improving fundamentals and a shift in global asset allocation logic, the Brazilian stock market became a hot spot for worldwide capital chasing opportunities in early 2026. Driven by a weakening dollar, rising commodity prices, and expectations of interest rate cuts, the Brazilian market not only experienced a long-awaited strong rebound but also attracted massive foreign inflows, including top hedge funds.

According to recent regulatory filings cited by Bloomberg, billionaire investor Stanley Druckenmiller’s Duquesne Family Office made significant purchases of Brazilian assets in Q4 last year. Over the three months ending December 31, the family office bought approximately 3.5 million shares of the iShares MSCI Brazil ETF (EWZ) and simultaneously purchased call options on the fund, precisely betting on a market explosion to come.

This strategic positioning quickly paid off. The iShares MSCI Brazil ETF surged 17% in January, marking its best monthly performance since 2020. The rally was mainly fueled by a weaker dollar and higher commodity prices, which led to double-digit gains in heavyweight stocks such as mining giant Vale SA and state oil producer Petroleo Brasileiro SA.

A reversal in market sentiment triggered a rush of foreign buying. Data shows that since the start of the year, foreign investors have poured over 34 billion reais (BRL) into the Brazilian stock market. Strategists note that global fund managers are ending their underweight stance on Latin America, shifting toward diversified allocations in emerging markets to hedge against the long-term risks of heavy US market exposure.

Big Players Getting in Early

Regulatory filings reveal Stanley Druckenmiller’s precise timing for entering the market. As one of the most closely watched macro investors globally, his family office, Duquesne Family Office, made large purchases of the iShares MSCI Brazil ETF at the end of last year. This ETF, with a scale of $9.1 billion, is the largest exchange-traded fund tracking Brazilian stocks.

In addition to directly holding about 3.5 million shares, the filings show the firm also bought call options on the ETF, indicating a strong bullish outlook on the Brazilian market.

Meanwhile, Duquesne Family Office sold off its holdings in the Global X MSCI Argentina ETF, signaling a clear shift in its investment focus within Latin America.

Currency and Commodity Double Boost

The recent rally in Brazil’s stock market has been led by the most liquid large-cap stocks, which are typically favored by foreign investors. The 17% jump in January was driven by a significant macroeconomic improvement.

A weakening dollar eased exchange rate pressures on emerging markets, while stable commodity prices directly boosted valuations of Brazil’s resource-based core assets.

Additionally, expectations of a shift in monetary policy further supported market sentiment. The market widely anticipates that Brazil, as Latin America’s largest economy, will begin cutting interest rates next month. This expectation has further enhanced the appeal of equities, driving a valuation recovery across the market.

Foreign Inflows and Institutional Outlook

Global funds are voting with their dollars. Bloomberg data shows that so far this year, foreign capital inflows into Brazil have exceeded 34 billion reais.

Itau BBA strategist Daniel Gewehr and others noted in a report that after completing roadshows in seven North American cities, they observed a significant increase in global investor interest in Brazil. The report states that international investors appear to be reducing their underweight positions in Latin America, with multi-asset funds seeking to increase exposure to Brazilian stocks through tools like EWZ.

Institutions remain optimistic about the outlook. According to Bank of America’s survey of Latin American fund managers, about 64% expect the Ibovespa index to rise above 190,000 points by the end of 2026. This target implies roughly a 2% upside from last Friday’s closing price.

As emerging market assets have performed strongly at the start of the year, driven by improving fundamentals and global diversification needs, the trend of capital inflows is likely to continue.

Risk Warning and Disclaimer

Market risks exist; investments should be made cautiously. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions herein are suitable for their particular circumstances. Invest at your own risk.