LATIN AMERICA -The current gloom over Latin America is overdone and overlooks the economic progress made over the past decade.
According to Schroders, the fundamentals are telling a more positive story which is not yet reflected in stock valuations. If this pessimism dissipates, as Schroders expects, markets will re-rate.
Schroders adds that structural vulnerabilities can be tackled with effective policy. The course of sovereign risk spreads and Latin companies’ cost of capital will be important catalysts for the expected re-rating.
Tapan Datta, director at Schroders, said: “With sound economic policies and a reasonable global environment - with no further declines in commodity prices or capital flows - a 3-5 year forecast of growth in the 3.5-4.5% range in the region seems eminently achievable and we will see the gap narrow considerably with Asia.
“If the pessimism on Latin America proves unwarranted – as we believe – the regions markets are representing a very good opportunity at this time.”
Schroders is a global asset management company with £88.3bn (E135.7bn / US$142.3bn) under management worldwide.