‘Gigantic’ Pension Cash Boost Has BTG’s Landers Betting on Chile

A veteran Latin America stock picker is betting on Chilean banks and retailers ahead of a potential second round of pension withdrawals.

Will Landers, who worked for 17 years at BlackRock and now heads equity strategy for the region at Banco BTG Pactual SA’s asset-management unit, said new withdrawals should spur a boost in consumption. At the same time, people who make withdrawals are expected to use the money to cut debt, improving asset quality for local lenders, he said.

‘Gigantic’ Pension Cash Boost Has BTG’s Landers Betting on Chile

“We expect a similar reaction to what happened with the first withdrawal, but this time the increase in consumption will likely take place amid the holiday season,” Landers said in a video interview. “The impact will be gigantic.”

Chile’s Congress approved in July a bill that let people withdraw as much as 10% from their pension saving accounts as a way to cope with the economic fallout from the coronavirus crisis. Chileans withdrew about $16 billion, using funds for everything from buying new automobiles to paying debt. The Senate is likely to vote next week on two separate bills that would allow a second withdrawal of funds.

Read more: BTG’s Landers Trims Brazil Holdings to Boost Chile Bet

Landers said that the pension funds, known as AFPs, are unlikely to be aggressive on the sale of Chilean stocks, as they sold more offshore holdings in the first round and their allocation in local equities is relatively low compared with the historical average.

Chile is the second-largest overweight position within Landers’ Latin American portfolio, only behind Brazil. Despite prospects of a turbulent year with the drafting of a new constitution and presidential elections in 2021, he sees political risk somewhat under control.

According to JPMorgan Chase & Co. strategist Diego Celedon, retailers Falabella and Cencosud should benefit most from a second withdrawal, while banks including Banco Santander Chile and Banco de Chile might gain from a pickup in inflation.

©2020 Bloomberg L.P.

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