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“I own no equities at all in Brazil,” says Heiner Skaliks, fund manager at the Strategic Latin America Fund (SLATX) in La Paz, Bolivia. “I prefer Mexico over Brazil.”
What's interesting is how well a number of the consumer names have done and how not well the commodity plays have done. Commodity plays overall haven't done well, but I think the situation with YPF made that situation worse (see farmland play Adecoagro - AGRO - which has exposure to Argentina). Some of the commodity plays are really down and while still really not without risk, valuation-wise are compelling - Vale being a big example. I owned Ambev earlier in the year, but sold it for a few bucks profit because I just thought it was overdone, even thought it offers a nice dividend.
FEMSA in Mexico (FMX or FMXUF) is probably richly valued, but is an interesting play, with holdings in the largest convenience store chain in North America, a 20% stake in Heineken and a large stake in Coca-Cola FEMSA.
I think Cielo (CIOXY.PK) is an interesting play in Brazil, and the commodity plays are particularly interesting (although I'm not looking for any additional commodity single names now.)
Overall, it is interesting though how well a number of Brazil plays have done versus the commodity plays.
China’s slowdown may deepen as policy makers unwind the excesses of a record credit boom while only gradually increasing stimulus, leaving 2012 growth at the weakest in 13 years, Pacific Investment Management Co. says.
“The economy is unlikely to bottom until the third quarter,” Ramin Toloui, Pimco’s global co-head of emerging markets portfolio management in Singapore, said in e-mailed comments May 13. “Policy makers will progressively turn the dial toward more stimulus, but not in the aggressive manner of 2009,” restrained by the goal of tempering the credit-fueled property market, he said.
"For investors that can afford to ignore the short term technical indicators, those are the Brazilian fundamentals. Yes, the country is tarnished, but she is still alluring, said Marcelo Salomon, an economist at Barclays Capital in New York on Friday.
Markets have become disillusioned with Brazil. Strong government intervention in several sectors, including the local currency, the real, has pushed investors to the sidelines. Equity outflows have been the norm for the last several weeks, according to fund trackers at EPFR Global.
First the bad news, which close Brazil investors already know."
{...}
Salomon said in a seven page note to clients that the pessimism on Brazilian growth is “excessive.” Monetary and fiscal stimuli will push the economy up in the second half of the year.
The credit cycle will gain more traction heading into the third quarter. The growth rate of the real wage bill, lagged by three months, is a good leading indicator of non-performance rates (overdue bills, defaulted loans). The benefits of the new upswing in growth of higher real incomes are only starting to kick in now. As we move into the second half, non-performers should start to fall, signalling a healthier banking sector. Government banks like Banco do Brasil beefing up price competition by lowering rates should have a larger short-term effect on loan spreads at places like Bradesco.
Comments
FEMSA in Mexico (FMX or FMXUF) is probably richly valued, but is an interesting play, with holdings in the largest convenience store chain in North America, a 20% stake in Heineken and a large stake in Coca-Cola FEMSA.
I think Cielo (CIOXY.PK) is an interesting play in Brazil, and the commodity plays are particularly interesting (although I'm not looking for any additional commodity single names now.)
Overall, it is interesting though how well a number of Brazil plays have done versus the commodity plays.
http://www.bloomberg.com/news/2012-05-14/china-growth-seen-at-13-year-low-by-pimco.html
China’s slowdown may deepen as policy makers unwind the excesses of a record credit boom while only gradually increasing stimulus, leaving 2012 growth at the weakest in 13 years, Pacific Investment Management Co. says.
“The economy is unlikely to bottom until the third quarter,” Ramin Toloui, Pimco’s global co-head of emerging markets portfolio management in Singapore, said in e-mailed comments May 13. “Policy makers will progressively turn the dial toward more stimulus, but not in the aggressive manner of 2009,” restrained by the goal of tempering the credit-fueled property market, he said.
http://www.forbes.com/sites/kenrapoza/2012/05/25/brazil-disappointing-now-but-not-for-long/
"For investors that can afford to ignore the short term technical indicators, those are the Brazilian fundamentals. Yes, the country is tarnished, but she is still alluring, said Marcelo Salomon, an economist at Barclays Capital in New York on Friday.
Markets have become disillusioned with Brazil. Strong government intervention in several sectors, including the local currency, the real, has pushed investors to the sidelines. Equity outflows have been the norm for the last several weeks, according to fund trackers at EPFR Global.
First the bad news, which close Brazil investors already know."
{...}
Salomon said in a seven page note to clients that the pessimism on Brazilian growth is “excessive.” Monetary and fiscal stimuli will push the economy up in the second half of the year.
The credit cycle will gain more traction heading into the third quarter. The growth rate of the real wage bill, lagged by three months, is a good leading indicator of non-performance rates (overdue bills, defaulted loans). The benefits of the new upswing in growth of higher real incomes are only starting to kick in now. As we move into the second half, non-performers should start to fall, signalling a healthier banking sector. Government banks like Banco do Brasil beefing up price competition by lowering rates should have a larger short-term effect on loan spreads at places like Bradesco.
Hi Scott,
I agree with GMO that the best way to play EM is through their consumers:
http://spectruminvestors.files.wordpress.com/2012/02/ad_capturingdomesticdemandinem_114.pdf
I continue to be attracted to the Brazil-based ABV, which is the largest holding in my preferred EM equity ETF, ECON.
Kevin