Investors bullish on Latin America

Latin American investors remain bullish on the continent’s outlook in 2011, with many planning to rachet up their exposure to Brazil and Mexico, according to a new poll.

At a time when money is dripping out of emerging market equity funds, more than half (65 per cent) of the 289 investors surveyed by Banco Santander at a recent conference still expect total returns on their Latin American holdings to match or exceed what they earned last year. And 91 per cent are betting Latin American equities will throw up positive returns in the first half of 2011, buoyed by booming commodity prices, spending by the middle class and the recovery of the US economy. Drilling down more closely, more than one-third of the investors polled (41 per cent) expect the MSCI-LatAm Index to rise 5 to 10 per cent while 21 per cent are even more optimistic and forecast gains of more than 10 per cent.

About 40 per cent of investors plan to add to Brazilian holdings; 23 per cent will push up Mexican positions; 11 per cent will supplement Peruvian stakes; and 10 per cent are bolstering their Argentine exposure.

In response, Ignacio Mendive, head of Latin American cash equities with Banco Santander, said: “There is no doubt Latin America is continuing to gain the attention of investors. As for the outflows from emerging market funds, you have to think that it’s a blip and the market doesn’t always go up in a straight line.”

For the third year in a row, commodity prices won out as the top driver behind the growth of Latin American markets.

And local currency emerging market debt is the preferred choice for fixed income investors, with 31 per cent identifying local market bonds as the best opportunity in the debt markets in 2011 – 17 per cent chose corporate bonds.

Steel and mining stocks, financials, and oil and gas companies emerged as the top sector picks.

About one-third of the 289 investors polled last month worked as equity portfolio managers at Latin American asset managers; 15 per cent were fixed income managers or analysts; and 6 per cent were hedge fund investors.

Source: http://www.ft.com