On Friday the Brazilian statistics agency, IBGE, reported that their economy expanded just 0.6% in the third quarter, which was well below expectations. This sent Brazilian stocks tumbling, Petroleo Brasileiro among them. PBR has had a rough 2012: the stock is down 27.7% year to date and currently trading near its 52-week low. However, now the stock is getting cheap enough to entice Brazilian bulls to take a shot on the stock. On Friday one trader bought 8500 April 20 calls for $0.72 with the stock at 18.05. This is a bullish bet that will profit if PBR is above 20.72, or 15% higher, at expiration.

Brazilian growth is highly dependent on growth in China, is one of their largest trade partners. Brazilian stocks have been sold for the past few weeks as data out of China showed a slowing economy and analysts downgraded Brazilian GDP expectations for 2012 and 2013. However, this morning data out of China was upbeat; the HSBC’s Purchasing Manager’s Index rose to 50.5 from 49.5 in October. This reading beat expectations and indicates that the manufacturing sector in China is expanding. Brazil’s PMI was also released this morning and showed a rise from 50.2 to 52.2. This indicates that Brazil’s manufacturing sector expanded at the fastest pace in two years and suggests that the government’s stimulus is finally helping the economy.

PBR is a government controlled integrated oil company and has a monopoly on the industry in Brazil. Therefore, this company stands to benefit immensely should the Brazilian economy return to the high growth rates seen in past years. PBR has underperformed the Brazilian Index EWZ by 16% this year, which suggests that there is a lot of negativity already priced into this stock. While one good PMI reading does not necessarily mean that there is a rosy outlook for PBR in 2013, it could entice some investors to step into the stock and pick a bottom. The stock has strong technical support around 17 and currently trades at 14 time forward earnings and pays a 1.3% dividend.

This trader is likely looking for the stock to bounce off of oversold levels should the data out of Brazil change to a more upbeat tone in 2013. Buying out of the money calls is the best way to play this, though PRB has long term structural challenges to face and could be forced to sell assets in 2013 even if the economy rebounds. Therefore this trade is highly speculative in my mind and should only make up a small portion of a portfolio that needs exposure to emerging markets or as a high beta play on rebounding global growth.