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Trading The Globe: Brazil

Brazil's stock market suffered its worst one-day plunge in three months after the government imposed a tax on foreign investments in local stocks and bonds.

Finance Minister Guido Mantega said on Monday the government would charge a 2 percent financial transactions tax on foreign investments in Brazilian stocks and fixed-income securities in a bid to prevent the country's currency from strengthening further. The tax took effect on Tuesday.

On the news, Petrobras and Vale , the two most-widely traded stocks in Brazil, slumped as investors dumped liquid shares. Meanwhile, Brazil's currency, the real (BRBY), tumbled 2.3 percent to 1.752 per dollar as traders fretted about the effects of the tax on short-term dollar inflows.


What must you know?

These events remind us that the rules of the game sometimes change in emerging markets, explains Tim Seymour. I still think Brazil is a great long-term story but it reminds why this is an emerging market.

For long-term investors Brazil is still attractive. Personally, I think events have presented a buying opportunity in stocks such as Vale and Petrobras. However I wouldn’t necessarily jump in immediately.


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Trader disclosure: On Oct. 20th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Finerman's Firm Owns (BAC) Preferred, (BAC) Call Spreads, (BAC); Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm Owns (BKS) Puts, Is Short (BKS); Finerman's Firm Owns (MSFT); Finerman's Firm Owns (TGT); Finerman's Firm Owns (UNH) Calls; Finerman's Firm And Finerman Own (WFC) Preferred; Finerrman's Firm And Finerman Own (WMT); Finerman's Firm Is Short (UNG), (IJR), (MDY), (SPY), (IWM), (USO); Finerman Owns (AAPL); Najarian Owns (BX) Call Spread; Najarian Owns (GE) Calls; Najarian Owns (LAZ), Is Short (LAZ) Call, Owns (LAZ) Puts; Najarian Owns (MGM) Calls; Najarian Owns (STX) Call Spread; Najarian Owns (XLF) Call Spread; Najarian Owns (YHOO), Is Short (YHOO) Calls; Najarian Owns (TEX) Call Spread; Finerman's Firm And Finerman Own (FLS); Finerman's Firm Owns (DRI); Seygem Asset Managemnet Is Short (PBR); Seygem Asset Management Is Short (EWZ); Seymour Owns (CHL), (EWZ), (AAPL), (BAC), (CAT), (MGM)

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