Chile is the only Latin American market other than Mexico and Brazil offering attractive opportuniti...
Chile is the only Latin American market other than Mexico and Brazil offering attractive opportunities to fund managers.
For Shareza Yusof, fund manager at Aberdeen Asset Management, Chile is the only market outside of Mexico and Brazil where he has exposure in his emerging markets unit trust.
Chile has a free trade agreement with the EU he notes and has another pending with the US, which will make it one of the few countries to do this outside the Nafta trade agreement.
Markets in the region, in common with most other global markets, have struggled in recent months, with no fund in the Latin America sector providing positive performance over either three months to 23 September or 12 months to that date, according to Standard & Poor's.
In part, that simply reflects global economic uncertainty, however individual economies in the region have also imploded.
Argentina has little to offer investors following the currency devaluation earlier this year and the economy is a long way from any form of recovery.
Argentine companies fall into two categories, according to Yusof. The first are those that need to restructure and service their high debt levels and look unattractive until this process has been carried out. The second category of company are those that are presently viable such as exporters but according to Yusof are too expensive compared to similar companies from other regions.
Alan Nesbit, head of Latin American equities at First State Investments, says the Latin American market has been rather disappointing over the past 10 years overall.
The continent performs well when there is strong global growth and the oil price is strong, he says. As Latin American economies are heavily weighted towards commodity exports, the global slowdown has negatively impacted on performance.
He agrees the most attractive market behind Brazil and Mexico is Chile. This has arguably one of the stronger economies in Latin America, he says, although Chile also suffers from the Latin American problem of a small economy and a dearth of large companies.
Historically it has been hard to invest locally in Chile although this has eased, says Nesbit. 'Today it is possible to invest locally but the issue is the size of companies, which affects the amount of money you can put in.'
He adds that the country has no trade or budget deficits and the central bank is strong but despite this the economy is faltering. 'Unemployment is relatively high and this is a real problem. Consumers have become reluctant to spend.' he says.
Added to which, the price of copper, a major export for Chile, is weak at present. This, however, has not discouraged Nesbit who has a holding in Antofagasta, a copper mine, which has strong product growth potential, he says.
The only other economy of note in the region is Columbia, where Nesbit holds two banking stocks. Liquidity is virtually non-existent in this market, he says, and it is very hard to trade into and out of the country. However, the government there is strong and is an American ally ' both strong points for investors, he notes.
Performs well when global growth is strong.
Chile has a stable economy.
Governments tend to be American allies.
Political instability continues in the region.
Many economies heavily indebted.
Lack of liquidity throughout the region.
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