Attractive valuations and surging commodity prices make LatAM an attractive proposition

August, 2022 Print

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Despite Latin America offering attractive opportunities before the Covid-19 pandemic, performance was poor.

However, strong commodity prices, improving current accounts, competitive currencies and attractive equity valuations should be positive for Latin American equities against a backdrop of dramatic macro-economic changes, according to John Malloy, portfolio manager, emerging markets, at Redwheel.

“Many company fundamentals are robust and we believe that now offers a good entry point for the asset class.”

Latin American equities are positively correlated with commodities as they represent around half of the exports from the region.

Commodity exports make up between 5% and 20% of GDP for the six main countries in the region: Brazil; Mexico; Chile; Peru; Colombia; and Argentina, producing copper, oil, gold, lithium, nickel, silver, corn and soybeans.

Redwheel has identified a number of key themes it believes may outperform over the long term. They include financial inclusion, healthcare, electrification, and the recovery of global travel.

According to Redwheel, Latin America still has the potential to offer a significant amount of growth, interesting investment thematics and secular growth drivers. There are also considerable growth opportunities across sectors, and this could be an opportune time for those interested in Latin American equities to get some exposure.

 

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