The Wall Street Journal reports,"investors have high hopes for Latin American stocks in 2014".
Stock market indexes from Mexico to Chile fell enough over the course of 2013 to offer up plenty of bargains, and weaker currencies around the region add to the potential for smart stock picking.
"It's a good buying opportunity," said Geoffrey Dennis, head of global emerging-markets strategy at UBS. "People are saying 'It was a terrible year in 2013, it has to be better in 2014.'"
Foreign-exchange woes have piled on further misery. The region's currencies have been losing ground against the dollar for months, with the Brazilian real weakening 15.2% last year and the Peruvian sol weakening 9.7% partly because of investor concern about the looming end to the U.S. Federal Reserve's $85-billion-a-month bond-buying program.
Brazil's benchmark Ibovespa index lost almost 16% in 2013 and in dollar terms plummeted 26%. The index's most heavily weighted shares, iron miner Vale SA and oil company Petroleo Brasileiro SA, lost the most market value in the year, according to Economatica. Vale lost $30 billion and Petrobras lost $34 billion.
Worst hit was Peru's IGBVL index, which dropped 23.6%, while Colombia's IGBC fell 11.2% and Chile's IPSA declined 14%. All three were even worse off in dollars. All stock index and currency figures were provided by FactSet.
While opinion is mixed about the potential for the region as a whole this year, investors see plenty they like in individual countries, though not always in the same countries.
The forward price/earnings ratio for Brazil's Ibovespa index was at 10.7 on Dec. 31, down from 19.2 a year earlier, according to FactSet. That compares with 15.4 for the S&P 500 on the last day of 2013.
In Mexico, Latin America's second-biggest economy after Brazil, the economy should bounce back in 2014, with an expansion of 3% after 2013's 1.2% growth rate, according to the IMF.
The growth slump last year may have been tied to Mexico's political cycle. Government spending rises ahead of a presidential election then declines rapidly afterward. Last year was no different with newly elected President Enrique Peña Nieto focusing on guiding reforms through Congress rather than on boosting short-term growth.
The biggest reform of all, the opening up of the country's oil industry to outside investors after a seven-decade monopoly by Pemex, could start to pay off quickly.
The next tier of Latin American economies, Chile, Colombia and Peru, will all see faster economic growth in 2014 than Brazil and Mexico, according to the IMF's forecasts. None of the three offer the breadth of options available in Brazil and Mexico, but there may be opportunities for careful stock-pickers that can hang on to shares, said Sammy Simnegar, a portfolio manager at Fidelity Investments
