Annual General Meeting

On Thursday 19 May 2022, Co-Portfolio Managers, Sam Vecht and Ed Kuczma shared the case for investing in Latin America, the top portfolio themes and the market outlook for the year ahead.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Key insights:

  • Latin America has benefitted from its exposure to rising commodity prices. The region has helped to fill the gap in global supply left by the Russia/Ukraine conflict.
  • Rising commodities prices have helped to deliver higher earnings momentum for Latin American corporates, and to reduce fiscal deficits built up during the pandemic.
  • Latin American equities still look cheap relative to other markets and to their own history.
  • Latin American central banks are ahead of the curve on inflation, having started to raise interest rates sooner than the US and Europe. This should mean that the region is closer to the peak of its hiking cycle.
  • The region has managed to side-step many of the geopolitical tensions across the globe, leaving it able to do business with all sides.
  • There has been a shift in global supply chains. Mexico, in particular, should be a beneficiary of the near-shoring trend given its pedigree in auto-manufacturing.
  • The portfolio has four key themes: structural growth, reinvestment opportunities, material stocks, plus companies benefiting from the reopening trade.
  • Structural growth trends include the development of commerce, with a migration from street markets to a formal shopping experience, plus healthcare and IT services.
  • In our materials exposure, we are focused on those areas with recovering demand and tight supply. This includes steel, copper, pulp and paper.
  • Latin American investment needs to focus four ‘c’s – commodities, consumption, currencies and credit. We continue to ensure we are on the right side of these key areas.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or financial product or to adopt any investment strategy. The opinions expressed are as of May 2022 and may change as subsequent conditions vary.