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Amid record global inflation and fears of a recession in the U.S., investors are taking a closer look at the markets of Latin America.
The relative attractiveness of the region’s equities has been building over the past 12 months due to two main factors, according to Dubravko Lakos-Bujas, head of global equity macro strategy and LatAm stock research at JPMorgan Chase & Co. The first is the “the phase-out of the exceptionally strong moment for U.S. equities following a massive price correction in growth stocks and the outperformance in the value sector. The second [is the] the positive impact of a trade shock, led by higher commodity prices.”
For the first three quarters of 2021, Latin America benefited from global market liquidity, but at the end of the year “things started to get a little more complicated,” according to Carlos Sequeira, head of research at BTG Pactual.
As inflation kicked in and equity markets dried up, investors began looking into opportunities around the globe, especially to countries that are commodity exporters like Brazil, Chile, Peru, and Colombia.
“This has attracted attention back to these countries, and we have pretty good inflows of money coming from international investors, especially into those countries,” Sequeira said, adding that Mexico is not experiencing this lift due to its lack of commodities and close ties to the U.S.
For insights like these, the buyside has once again selected BTG Pactual as the region’s top research team, according to Institutional Investor’s 30th annual Latin America Research Team survey.