Latin American Markets Update
Economic growth in Latin America has been weak for several years and the outbreak of Covid-19 is likely to delay any recovery. Commodity prices have fallen significantly, while local activity will be disrupted by a sharp increase in the number of cases of the virus. This will remain a major near-term headwind for financial markets in the region.
Disruptions to the global economy and commodity markets should prove temporary. Europe and the US may face stress in the near-term, but there is some evidence that activity in China is slowly picking up, now that the virus appears to have been contained.
As such, once the dust settles, we see opportunities in Latin America for investors. Valuations are now becoming more appealing while even looser G10 monetary policy should ultimately drive another hunt for yield.
Listen to the full update on Latin American Assets to learn more.
- Slower economic growth in China and negative expectations for regional growth were already weighing on LatAm issuers before the recent market turmoil.
- With the Coronavirus and drop in oil prices, there has been an indiscriminate sell off in bonds, with high yield being the worst affected
- Looking at the technicals and fundamentals of LatAm as well as the nature of the crisis, we see selective opportunities in the region among more defensive sectors and credits that will continue to benefit from more inelastic demand (e.g. Protein, Ultilities etc)