QROPS ADVICE: Investment News: Spotlight on Latin America Equity

Emerging Market-themed funds finished 2009 as the undoubted success story of last year, with China certainly being the most talked about of the many apparently 'new' emerging economies. Although perhaps one of the most surprising investment stories of 2009 was the collective success of the Latin America economies.
Along with the rest of the world, Latin America suffered from the fall-out of the global recession heading into 2009. However, unlike its European and Western counterparts Latin America has never been driven nor as heavily underpinned by its financial stock market, and as such didn't suffer the same damaging consequences to its respective economies.
Latin America's fortunes have historically been very much dependent on the demand of its core resource - commodities. The second half of 2009 brought a demand for commodities that fuelled the regions impressive growth from two major areas; emerging markets (particularly China), and investors.
China is keen to source commodities such as oil, soyabeans and copper from Latin America in order to fuel its high rates of economic growth, so much so that China now does more than USD100bn in trade with Central and South American countries, twenty times more than it did just a decade ago. Indeed, Chile was the first non-Asian country to sign a Free Trade Agreement with China in 2005. Furthermore, China is also making substantial sovereign wealth investments in the region's energy resources, as well as other infrastructure.
In addition to the direct purchase of commodities from other countries, investors have been very quick to capitalise on the increase in activity in Latin America economies. Collective investment funds focussed on the Latin America region enjoyed extremely impressive returns, buoyed in the main by commodity-related assets. The MSCI Latin American equity index jumped roughly 97% from the end of 2008, stocks in Brazil more than doubled, while stocks in Argentina almost doubled. The performance of such funds was also assisted by much more active Latin American domestic economies, stimulated by local government tax cuts and reductions in central bank interest rates.
With demand for its commodities looking set to continue, as with China, it is now the subsequent growth of the domestic markets in Latin America that many investment experts see as key to the future of the region in 2010. As the biggest region, Brazil will play a fundamental role in this, as Will Landers, a senior portfolio manager at BlackRock who manage the Hansard Latin America Fund (C08, available in both HIL and HEL) comments, "You have the secular story that we've been working on the last six years plus the growth in Brazil's middle class and the fact there's an 8.75 percent nominal interest rate, the lowest rate in my lifetime," he said. "This is a much different environment than we've had in a long time, and our belief is that it still hasn't been fully priced into the equity markets yet."
"We believe that the regions resilience during the crisis and its ongoing recovery ahead of most regions in the world mean that it should continue to enjoy forward multiple appreciation. In addition, earnings revisions should also be positive and supportive for Latin American equity markets as we enter 2010."