Best Ways To Take Advantage Of The Two Tailwinds In Latin America

It is true that most investors in Spain limit their positions to the geographies that they consider safer. These are normally Europe and the United States, and to a lesser extent, Japan. However, there are many other markets available to look for returns outside some borders, those of the Old Continent, which this year are suffering a punishment caused by inflation to which we are not accustomed, which has led the ECB to accelerate the rate hike.

One of these this year is being Latin America , where its greater exposure to raw materials and energy (as producers thereof) is leading many of its companies to be the focus of investors in recent months. In this sense, the Bloomberg Latam Index , which encompasses 85% of the market capitalization of this region , has recorded a little more than 3% since the beginning of the course compared to the losses that weigh on the main world indices. The Argentine stock market scores 75%, the Brazilian 5% and the Chilean 30%, for example.

However, they have encountered another tailwind that is pulling their kites higher, as is the magic of the currency effect. Latin American currencies are appreciating against the euro , which adds profitability for any investor who does so in the community currency.

The same Bloomberg index scores 14 percentage points more in the same period if it is accounted for in euros. In fact, the only currency that has not risen is the Argentine peso, which is still at historical lows, but that does not prevent the one that entered the Merval at the beginning of the year from continuing to gain more than 40%.

In the case of the Brazilian Bovespa, profits are multiplied almost by 6. In Chile, another 6 points are added to its previous return of 30% in the year, while in Peru and Mexico they allow all accumulated losses to be erased. Only in Colombia, where the currency has also appreciated in this period, has it failed to avoid the red numbers on its stock market.

South and Central America have always stood out for having greater political and social instability than other parts of the world, which is why they have always been demanded a discount for it. This year there have already been elections in Colombia and “now it’s time to find out what the new government’s tax reform will be like,” they recall from Citi, “which will tax individuals more but also companies, exports, coal and some food,” they add.

In October the elections will be held in Brazil, where the candidate of the Workers’ Party, Lula Da Silva, starts with an advantage in the polls against Jair Bolsonaro. Finally, although in Argentina the elections are not scheduled until the end of 2023, the current instability could force the government of Alberto Fern├índez to advance the elections.

how to invest
For an investor there are two ways to get on this trend, either directly through the purchase of shares of the companies that make up these stock markets or through investment vehicles, which can be indexed or active. In order to discriminate between the latter, the equity funds that invest in the most profitable region in the last five years, with minimum investments of less than 50,000 euros and that are marketed in Spain, have been selected.

In this sense, the most profitable in the last five years has been the DWS Invest Brazilian Equities NC , which obtained five Morningstar stars, from the manager DWS and which accumulates an annualized 11.4%. So far this year it has achieved almost 28%. In the same management company they can boast of having the second vehicle that has given the most performance in this period, which is the DWS Invest Latin American Eqs NC , which has obtained 8.6% per year in this five-year period.

The third in discord is managed by Renta 4 and is the Latin America R FI , with 3.92% per year since 2017. It also receives the highest rating from Morningstar. These three products are followed by the BNY MellonBrazil Equity Eur A Acc , the Schroder ISF Latin American B Acc Eur and it is not until eighth place that we find the next Spanish, the Bestinver Latin America E Eur Cap .

If we simply refer to what has happened this year, the product that is proving the most profitable so far is the BNP Paribas Brazil Equity C Eur C , which with three Morningstar stars and investing only in the Rio de Janeiro country, achieves a return of 26. 7% .

Of all the selected funds, this exercise only punctures Ninety One, which loses about 15% and has its investment focus on small companies.

Samira Wilson

Samira Wilson is one of the highly experienced employees among the staff at the StKatesWheel News portal. Samira handles our Finance and Technology column. She is an immense knowledgeable person. She loves reading books, and by book, it means of all the genre. Maximum of the time she is found in the office library searching topics for her articles. She is an excellent team leader and unique in her ways.

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