Sunday , July 25 2021

What do investors recommend to invest in Latin America?

expert opinion

Global experts believe that at present value, there are attractive buying opportunities in several countries in the region

Despite the complicated situation experienced by markets around the world in recent weeks, managers continue to look at investment opportunities in Latin America and analyze differences with respect to other major developing regions: Asia.

Santander AM. "Latin America has grown, since 2000, an annual average of 2.5%." Another thing is the stock market. The annual combined results, which from MSCI in Latin America compared to Asia, are exactly the same (more than 9.1%), said Luciano Buyo, senior manager of investment funds in Latin American equities, which is clear that 30 years of investor performance is very attractive lastly, "a positive message that will follow the next 30".

Pictet. "Asia will continue to grow more, thanks mainly to the presence of China, but we continue to reflect on Latin America for diversified needs," said David Chatterjee, leader of global senior emerging markets on Pictet AM.

"Asian markets have a large correlation between them, which means that if China grows at a slower pace this will affect Japan or South Korea," said the expert.

Allianz Global Investor. "We see less volatility with respect to China, where there is doubt about its growth", Alejandro Velasco, vice president of fixed income for the emerging market at Allianz Global Investors, showed "the fundamentals of a solid Latin American company."

In terms of fixed income, Asia is the issuer of the company's debt, according to him, something that is "difficult for investors to absorb"; However, Latin America has an opposite trajectory, because the issuance of bonds of these companies is shrinking.

Income 4. Alejandro Varela, special manager in Latin America from Renta 4, argues that the region "presents strong points" as "the way in which monetary policy is being addressed". "A change in liberalization will occur" and at a time when the "reverse cycle" "opportunities that really exist" will be seen there, experts point out.

Brazil and Mexico

From Santander AM they see "value" in the future, although they suggest that the state must "reduce fiscal or infrastructure costs". In connection with political forces and a new Executive led by Jair Bolsonaro "has the opportunity to improve the economy with concrete steps."

As for Mexico, "it remains an anchor for investors in the region" with "independence" from the central bank that has "cared for the year".

"Maybe this is the time when interest rates will be in a relatively low area for a longer period of time," they said from Pictet AM. However, this highlights "the high political noise that exists around these two countries." After the election, "the Brazilian government has a lot to do to improve the fiscal situation, where there is a lot to do, and in Mexico we still see a lot of votes, which will keep volatility at a very high level during December".

In fixed income markets, Brazil and Mexico are also the two main markets in the region. In this sense, Velasco acknowledges that what influences the current bond "is the risk of execution in Brazil". For him, "The government is committed to reforms that will help in economic growth, and we will monitor these steps, including pension reform."

Regarding Mexico, "there are some changes in the government's tendency." Until a few weeks ago there was a lot of optimism on the market thanks to the message sent by the AMLO Executive, but now we will really see what will happen after some obstacles are seen. in recent weeks (such as cancellation of airport projects in Mexico City), which caused uncertainty and soaring debt prices. "

The government of Andrés Manuel López Obrador will take office in early December, despite the fact that elections were held during July.

Varela, on the other hand, recognizes that in Latin America's Rent 4 fund portfolio "80% or almost 90% consists of Brazil and Mexico. " "We have greater confidence in Brazil, a period of open opportunity with an economy that grew 1% this year and that could reach 2% in 2019. However, doubts arose around Mexico where the latest decisions taken by the government have frustrated what is a hopeful view. There is more security now almost in Peru than in Mexico. "

What's more, Velasco wants to make it clear that the government that will assume AMLO does it with a "very positive legacy".

Other opportunities in Latam

Luciano Buyo highlighted, first of all, Argentina as a country where there are also investment opportunities, such as utilities, with "physical assets" that can be "touched". On the other hand, Chile stands out "in its consumption sector". This is a sector that experts highlight as one of the drivers that will drive the Latin American economy in the years to come. "After the first wave led by companies such as Petrobras, other sectors will emerge, such as the industrial sector and consumers."

Regarding Argentina, Pictet managers have some doubts about the current situation in the country. "We haven't invested yet, even though we see some recovery," he admitted. "Regarding other regions, we look at sectors such as the Brazilian consumer sector, as well as Banco do Brasil, which is also related to consumption".

Renta 4 claims to have "a lot of weight in the financial sector, with a very reasonable multiple of 10 times their PER reaching an ROE of 18%." Low penetration of the financial sector allows more potential in this region. In addition, he highlighted, in line with other experts, the evolution of consumption, thank you "for the improvement of the middle class". "And we also enter large mining companies, focusing on recovery of lithium or copper."

On the debt market, Alejandro Velasco said he was positioned "in a defensive way he found outside Mexico and Brazil, as in the Andean region which tends to be more defensive, in Chile and Peru." On the other hand, experts acknowledge that "the results that have been seen in the elections held are continuity, there is also opportunity in Colombia." "It also doesn't like the telecommunications sector, because we see many opportunities to increase data usage in this region."

Relations with raw materials

"We have a different level of relations with commodities as a region, it's true that China is slowing and that it can have an impact," Santander AM said, pointing to measures adopted by the government such as the Mexican government. who tried to de-link their account with oil prices.

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