BNP Paribas Investment Partners yesterday put an overweight rating on emerging markets in Latin America, and on Brazil in particular, in anticipation of up to 40 percent corporate earning growth in the next 12 months.
“Latin American is our top pick for next year,” the asset management firm’s Paris-based product specialist Roman Podkolzine, whose investment team manages US$15 billion in assets, told an investment outlook in Taipei yesterday.
The firm also equally favored emerging markets in Asia, he said.
The growth of earnings per share among Latin American companies, which will be the market’s main driver, is expected to jump between 30 percent and 40 percent more next year, the analyst said.
That suggests there is further room for upside in the valuation of the region’s equities although the expected earning growth has been priced in, he said.
Further support will come from the region’s accelerating self-sustainable economic growth, low inflationary and sovereign risk as well as a low export dependency ratio.
For example, Brazil has one of the world’s lowest export dependency ratios at 15 percent, compared to India’s 20 percent, China’s 35 percent and 50 percent in Russia, he said.
Sector-wise, Podkolzine favors materials and financials in the region because of continued demand for commodities and expected credit growth next year.
Podkolzine urged investors to build up exposure in an incremental way in the next three to nine months as longer term holdings have proved to be the most rewarding.
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