Latin America Fund – Fund Manager Update

Stock markets in Latin America benefitted from the positive vaccine-related news flows and the Federal Reserve’s commitment towards the zero-bound of interest rates for a prolonged period of time. As a result, the relevant regional stock index rose 11.9% in USD in December.

The post-pandemic recovery of domestic spending in Brazil continued, as retail sales rose 6% YoY in October. Meanwhile, industrial growth momentum slowed to 0.3% YoY in October. The cooling industrial performance and the depressed inflationary environment allowed the central bank to keep the key interest rate at 2%, an all-time low.

Meanwhile, the Mexican economy remained weak (the monthly GDP proxy index declined 5.3% YoY in October), since both the demand and supply side continued to contract, i.e. retail sales decreased 7.1% YoY, whilst industrial production fell 3.3% YoY. Elsewhere, recovery in Chile continued, as retail sales rose 25% YoY in November partly due to last year’s low base. The Peruvian economy followed suit, albeit somewhat more slowly, as economic activity in October decreased 3.8% YoY in October, a less steep decline compared with the previous month.

In December, Locaweb (Brazil, software solutions), Banco Santander (Brazil) and Ultrapar (Brazil, oil and gas storage and transportation) were the top performers. In contrast, Atacadao (Brazil, cash & carry) was the greatest detractor.