Barings has announced it is positive on its Latin America market exposure saying there is a compelling investment case in both Brazil and Chile, while Colombia is a market worth watching.
Fund manager, Mike Simpson, took over the Dublin-domiciled Baring Latin America fund six months ago. "At the country level, we are currently bullish on Brazil and Chile and are warming up to Colombia. We continue to maintain the majority of our holdings in Brazilian stocks, which we have seen provide a strong rebound after market falls. The stocks are currently attractively valued, with Central Bank easing and pro-growth fiscal policies supporting the macro economy.”
Simpson says that Chile also presents a “compelling case” for investment where the current PE ratio is at a multi-year low at 15x, compared to the 10 year average of 18x. This has significantly narrowed the premium gap with Mexico, which is currently trading at a PE ratio of 14x.
"We are keeping an eye on Colombia where, after a couple of years of underperformance, valuations are again becoming reasonable. Following a period of monetary tightening, inflation readings are stabilizing, and so we are looking to increase our holdings through the consumer discretionary sector, confirms Simpson.
In terms of sector holdings, Barings is most positive on Brazilian financials and is expecting the sector to rebound once the macro prudential measures, which led to the sector underperforming in 2011, are unwound. Barings says it is also positive on Brazilian and Colombian energy companies and Brazilian utilities firms, the latter as a hedge against inflation.
Simpson and his team are expecting the emergence of a new middle class to play a key role in the region's growth story with important consequences for asset allocation decisions. In general, reminds Barings, an expanding middle class drives consumption and growth and encourages entrepreneurship and innovation, stimulating smaller businesses which make an economy thrive.
The Baring Latin America Fund aims to achieve long-term capital growth through investing in Latin American securities. Launched in April 1993, the fund has $676.2 million of assets under management as at 31 January 2012.
Lasting power of attorney
Three risk profiles
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Will face 'appropriate action'