EMERGING MARKETS : Latin funds back on an upward beat

With the international rescue for Mexico in place at last, investors are considering what view to take of Latin American markets as the dust begins to settle.

With hindsight, the launch of a number of retail Latin American funds in the second half of last year should have sounded alarms about the danger of a large amount of footloose money washing around.

And indeed, a lot of it fled after the 20 December Mexican devaluation, triggering the crash there that spilt over into other emerging stock markets.

Yet many retail funds report that there have been surprisingly few redemptions of units by private investors.

Nicholas Morse, of Martin Currie in Edinburgh, is typical when he says: "We have seen a small number of redemptions by unit trust investors, but by no means a flood."

Funds had increased liquidity in anticipation of more redemptions but have so far not needed it. Some strategists are beginning to argue that this cash will soon be reinvested in the more attractive Latin markets. Some are looking good value after the correction they have suffered since Christmas.

Carolyn Dakers, senior fund manager for Thornton's Conquistador fund, argues that the crisis will be good for the region's markets in the long run. "It has shaken out the speculative short-term money," she says. The episode has reminded investors about the sort of disasters that can occur in emerging markets, which all fund managers say should be considered as long-term investments.

The investment managers believe they are the markets that will deliver the highest long-run returns. For all the problems of volatility and illiquidity, emerging economies will grow faster than developed countries.

Ms Dakers says: ``The Latin markets are certainly going to be volatile for the next few weeks. Even so, there is still a lot of interest from investors, although people are uncertain when to put their money in.''

Mark Turner, Latin American manager for Perpetual, thinks some of the region's markets will advance steadily this year, although with no big bounce. ``It will require a certain amount of foreign buying to start the momentum, but locals will buy too after selling out in the past month,'' he says.

There is unanimity that Mexico should be avoided. Tamzin Hobday, a strategist at Barings, says: ``There are some very interesting blue-chip companies in Mexico, but you are still looking at a recession and 20 per cent inflation this year.''

Argentina is also out of favour with the international investment community. Although the currency risk is small, the country is holding elections in May. There are also serious concerns about the fragility of its banking system.

The fund managers' favourites are Chile and Brazil. Chile has falling inflation and its industrial output is growing. On top of this, local pension funds into which Chileans are now obliged to put a high proportion of their salary are heavy investors in their own stock market. Their flow of funds should preserve the market from excesses of volatility.

Brazil is another country with strong growth and the added temptation of a privatisation programme. This is not finalised, but - depending on the flotation prices - could prove enormously popular. According to Micropal, Brazil has already been the main beneficiary of funds moving out of Mexico.

Mr Turner of Perpetual says: ``Choose dedicated funds for their expertise in the region, and ones not holding too much cash. Investors should make money in Latin America by Christmas, with some big gains in the second half of the year.'' Performance of Latin American funds to December 1994 Closed-end 3 mths 6 mths Size % % (millions) Baring Puma Fund ($) -22.52 0.19 188 Edinburgh Inca Trust (£) -24.63 -1.60 34 L. Am. Inv Trust Undil -22.58 10.37 194 - Foreign & Colonial ($) Scudder L. Am. -18.60 -10.06 43 Investment Trust (£) Templeton L. Am. -19.69 -10.31 39 Investment Trust (£) Open-end Abtrust L. Am. Fund (£) -24.04 -8.45 17 Edinburgh Exempt (£) -27.28 -8.82 12 Edinburgh L. Am. (£) -27.97 -10.79 35 Fleming L. Am. Exempt (£) -26.84 -6.69 50

%age returns, NAV to NAV, gross income reinvested. Source: Micropal

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Sport
Dave Mackay lifts the FA Cup in 1967 having skippered Spurs to victory
football
Life and Style
Marie had fake ID, in the name of Johanna Koch, after she evaded capture by the Nazis in wartime Berlin
historyOne woman's secret life as a Jew in wartime Berlin
News
Jihadi John
newsMonikers like 'Jihadi John' make the grim sound glamorous
Arts and Entertainment
As depicted in Disney's Robin Hood, King John was cowardly, cruel, avaricious and incompetent
film
Life and Style
Travis Kalanick, the co-founder of Uber, is now worth $5.3bn
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn