Saturday , May 28 2022

What do investors invest in Latin America?



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Experts at a global level believe that at present there are interesting buying opportunities in several countries in the region

Despite the complicated situation faced by markets across the globe in recent weeks, managers continue to see investment opportunities in Latin America and analyze differences from the other emerging region: Asia.

Santander AM. "Latin America has increased, since 2000, an annual average of 2.5%". Another thing is the stock market. The combined annual production of MSCI in Latin America as compared to the Asian one is exactly the same (just over 9.1%), "said Luciano Buyo, Senior Investment Fund Manager of Latin America, for the investor has been very attractive over the past 30 years, "a positive message that will follow in the next 30 years."

Pictet. "Asia will continue to grow further, especially due to China's presence, but we continue to think Latin America about the need for diversification," says David Chatterjee, global head of emerging markets at Pictet AM.

"The Asian market has a strong correlation between them, which means that if China grows at a slower pace, it will affect Japan or South Korea," says the expert.

Allianz Global Investors. "We see less volatility towards China, where there are doubts about its growth," Alejandro Velasco, vice president of fixed income for emerging markets at Allianz Global Investors, highlights "solid foundations of Latin American companies."

As far as fixed income is concerned, Asia is the major issuer of corporate debt, in its opinion, something "difficult to absorb by investors"; however, Latin America has the opposite trajectory, as these bond issues of companies are shrinking.

Revenue 4. Alejandro Varela, a Latin America-based manager of Renta 4, claims that the region "presents strengths" as "the way monetary policies are managed." "A liberalization will take place," and when "the cycle returns," "the opportunities that really exist" will be seen there, the expert says.

Brazil and Mexico

From Santander AM there is "value" in the future, although they suggest that the country should "reduce tax or infrastructure costs". In terms of political power and the new Executive led by Jair Bolsonaro "has the opportunity to improve the economy through concrete measures."

As for Mexico, "remains anchor for investors in the region," with "independence" from the central bank that has been "groomed for years".

"Perhaps this is the time when interest rates will be in a relatively low area for a longer period of time," they say from Pictet AM. However, it highlights the "high political noise that exists around these two countries". After the elections, "the Brazilian government has much to do to improve the tax situation, where there is much to do, and in Mexico we continue to see a lot of noise that will keep volatility at very high levels during December as well."

In the fixed income market, Brazil and Mexico are also the two main markets in the region. In this respect, Velasco recognizes that what affects today's bonds is "the risk of execution in Brazil." For him, "The government is committed to reforms that will help it in economic growth and we will follow these measures, including pension reform."

As for Mexico, "there has been a change in the government's tendency." Until a few weeks ago, over the messages the AMLO Executive sent, there was a lot of optimism, but now we will really see what will happen after a few obstacles seen. in recent weeks (such as the cancellation of the Mexico City airport project), causing uncertainties and a rebound in debt prices. "

Andrés Manuel López Obrador's government will take office in early December, despite the fact that elections took place in July.

Varela, on the other hand, acknowledges that in the portfolio of the Renta 4 Latin America "80% or almost 90% of it is made up of Brazil and Mexico. " "We have more confidence in Brazil, a period of opportunity opens with an economy that grows by 1% this year and may reach 2% in 2019. But doubts arise around Mexico, government decisions have frustrated what what was a hopeful perspective. There is more security now in Peru than in Mexico. "

In addition, Velasco wanted to clarify that the government that is going to assume AMLO does it "with a very positive heritage."

Other opportunities in Latam

Luciano Buyo highlights, first of all, Argentina as one of the countries where there are investment opportunities, such as utilities, with "physical goods" that can be "reached". On the other hand, Chile stands out "in the consumer sector". This is the sector that the expert highlights as one of the engines that will move the Latin American economy in the coming years. "After the first wave of companies such as Petrobras, other sectors will emerge, such as the industrial and consumer sectors."

As far as Argentina is concerned, Pictet has some doubts about the current situation in the country. "We have not invested yet, although we see a recovery," he admits. "As for the rest of the region, we look at sectors such as the Brazilian consumer sector and also Banco do Brasil, which is also related to consumption."

RENT 4 claims to have "a lot of weight in the financial sector, with very reasonable multiples of 10 times PER reaching ROE of 18%." The low penetration of the financial sector allows much more potential in the region. In addition, he points out, in line with the rest of the experts, the evolution of consumption, thanks to the "middle class growth". "And we went into the big mining companies focused on the recovery of lithium or copper."

On the debt market, Alejandro Velasco says he is positioned "in a defensive way he finds outside Mexico and Brazil, as in the Andean region that tends to be more defensive in Chile and Peru." On the other hand, the expert acknowledges that "the result that was seen in the organized elections was continuity, there are also opportunities in Colombia." "He also likes the telecoms sector because we see many opportunities to increase the use of data in the region."

Relationship with raw materials

"We have varying degrees of relations with goods as a region, it is true that China is slowing down and that it can have an impact," Santander AM said, highlighting measures taken by governments like the Mexican government. who have tried to disconnect their accounts at the price of oil.

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