Like many stock markets, Latin America felt the knock-on effect of last year's economic crisis in Asia. Investor confidence in most emerging markets slumped as a result.
"This was despite the Latin American economies being as robust as ever," points out David Park, the head of emerging markets at Scottish Widows.
"Investors have generally pulled out of emerging markets. In particular, there's been an absence of US mutual fund flows into Latin American markets. This is more down to concern over the potential risks of any overspill from the Asian crisis rather than to a serious deterioration in prospects for Latin America."
In the first five months of this year, Latin American markets have fallen by anywhere up to 25 per cent. Investment funds investing generally in the region have been less hard hit because the largest markets, Brazil and Mexico, have been less severely hit. These are down 10 per cent and 20 per cent respectively.
"Despite the recent falls, investment prospects in the region still look good," says Suzanne Carrington, who manages the Save & Prosper Latin American unit trust fund. "In the last few months it's been external factors which have been determining Latin American stock market behaviour. Now the markets are cheap and the outlook for them is good, although investors may not see a sustained improvement in the markets until later this year." Ms Carrington points out that many of these economies are growing at a healthy 5 per cent a year and companies are becoming more efficient,increasing profitability.
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