Brazil, Chile and Colombia Are Favored Markets at Morgan Stanley
Brazil, Chile and Colombia Are Favored Markets at Morgan Stanley
(Bloomberg) -- Morgan Stanley calls Brazil, Chile and Colombia among the top Latin American equity markets to play a pickup in economic growth and a global rebound over the next several quarters.
The MSCI Emerging Markets Latin America index is expected to end 2020 at 3,200, implying an upside potential of about 19% in U.S. dollar terms from current levels, analysts Guilherme Paiva, Juan Ayala, Cesar Medina and Nikolaj Lippmann wrote in a report dated Nov. 19. “We expect global and local factors to support gains throughout 2020.”
The bank is overweight Brazil, Chile and Colombia, while Argentina, Mexico and Peru are rated underweight. “We recommend a small overweight in Chilean equities despite the ongoing political uncertainty because historically attractive valuations provide an important cushion,” the analysts said.
Itau Unibanco Holding SA, Banco Bradesco SA, Banco BTG Pactual SA, PagSeguro Digital Ltd, IRB Brasil Resseguros SA, Petroleo Brasileiro SA, Notre Dame Intermedica, CPFL Energia SA, Fibra Macquarie and Globant SA are Morgan Stanley’s top ten stock ideas in the region.
Playing Brazil
Brazil’s benchmark Ibovespa equity index should end next year at 125,000 — 18% above current levels in local currency. The main overweights in Latin America’s largest economy are banks, transportation and health care. “At the sector level, in Brazil, we like sectors leveraged to an economic recovery in 2020.”
Morgan Stanley also told investors in Brazil to avoid some domestic defensive sectors and some selective exporters that should be hurt by a weaker U.S. dollar. For example, the bank is underweight beverage makers, miners, education providers and shopping malls.
To contact the reporter on this story: Vinícius Andrade in São Paulo at vandrade3@bloomberg.net
To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Scott Schnipper
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