Barings makes the case for Latin America

Baring Asset Management says attractive share price valuations provide a strong chase for investment in South America, in particular for Brazil and Chile, with Columbia as a country to watch.

Barings manager of its Latin America fund, Mike Simpson, commented: “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.” He added that Chile also has a compelling investment case, with a current price to earnings ratio at a low of 15 times earnings, compared to a 10-year average of 18 times earnings. Simpson went on: “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 stabilising, and so we are looking to increase our holdings through the consumer discretionary sector.”

The fund is planning to reduce the number of holdings to around 45 stocks, down from 64 at the end of 2011, as it seeks to focus on its strongest convictions, with a split of 70- 80% core long holdings and 20-30% in more tactical positions. In terms of sectors, it is positive on Brazilian financials, energy companies and utility firms, with the latter as a hedge against inflation.