Ask The Experts: Growth Drivers Of Latin America
Mark Livingston, Product Manager of Emerging Market Equities at FIL Investment Management (Singapore) Ltd, shares with Fundsupermart what he thinks are the growth drivers within the Latin America region and how the Fidelity Latin America Fund aims to benefit from them.
The benchmark adopted by the fund, the MSCI Emerging Markets Latin America Index, has risen more than 16% in the month of January alone. Do you think this is sustainable and what is your outlook for Latin America equity markets?
- In January, many high beta markets did extremely well
- Fidelity Latin America Fund looks for bottom-up stock ideas and on an individual basis, many companies still look very attractive at this point
A persistently high inflation rate was one of the concerns surrounding Brazil's equity markets in 2011. Do you think the Brazilian government will succeed in taming its inflation rate in 2012 and what will be the impact on investors?
- At the end of 2011, inflation rate was around 6.5% and the central bank was forced to increase rates to 12.5%
- Interest rates have now declined to 10.5% and a number of companies have benefitted from the decline
- A company the fund likes is MRV, a low-cost home builder, which is very sensitive to interest rates
In addition, the latest round of industrial figures point towards a slowing Brazilian economy. What are your views on this issue and is the Fidelity Latin America Fund positioned for an eventual slowdown?
- Flat GDP growth since second half of 2011, largely due to slowdown in manufacturing sector which has been hurt by a very strong Brazilian real
- However, a strong Brazilian real has benefitted the Brazilian consumer
- Hence, the fund is positioned for the increasing purchasing power of the Brazilian consumer
Other than the fund's positioning in the Brazilian market, can you elaborate further on the fund's investments in the other geographical regions? Is there a particular investment idea the fund is bullish or bearish on right now?
- On Colombia which has very low credit penetration rates, the fund is positioned for a more maturing market
- In Mexico, manufacturers are benefitting from the raising costs of the Chinese worker, which makes Mexican produced goods cheaper
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||12 March 2012
||Ask The Experts: Growth Drivers Of Latin America