Best Start in 31 Years Puts Latin American Stocks on Cusp of Bull Market

(Bloomberg) -- Latin American stocks are having the best start to a year since at least 1988, nearing a bull market, as investors bet economic growth will strengthen and newly elected governments will implement reforms.

Gains in the MSCI EM Latin America Index through Jan. 15 exceeded 10 percent, beating similar periods in any year including the commodity-led rally of 2006 or the bounce-back in 1988 from a regional debt crisis. That puts the advance from a bear-market low on Sept. 11 within earshot of the 20 percent threshold that will mark a new bull phase.

Investors are returning to Latin America after an election super cycle that included 14 presidential votes in a two-year span. Political stability, combined with expectations for the fastest economic growth since 2013, have made the region a magnet for emerging-market money managers reeling under the impact of a $3.76 trillion sell-off last year.

“Against a challenging backdrop for emerging markets, Latin America is the only region which should do better than in 2018,” Anjeza Kadilli, a Geneva-based economist at Pictet Asset Management SA, wrote in a note. “Elections have led to the establishment of governments willing to reform the public sector and to stimulate the economy through long-term policies.”

The MSCI Emerging Markets Index, the main stocks gauge for the asset class, has advanced 4.2 percent this year, after a 17 percent annual decline. It rose 0.2 percent to 1,006.62 as of 10:18 a.m. in London.

Argentina, Brazil, Mexico and Colombia have risen the most in dollar terms, highlighting the region’s outperformance. Traders are betting that Brazil President Jair Bolsonaro will quickly fix the nation’s bloated pension system, while Mexican President Andres Manuel Lopez Obrador, after a rocky start, is trying to soothe investor concern about his populist agenda.

The emerging Europe, Middle East and Africa region isn’t far behind as the region’s subindex takes year-to-date gains to 6.1 percent. That’s the best start since 2006, when a commodity-led rally buoyed markets including South Africa and Russia.

That leaves Asia as the underperformer in the developing world. Stocks in the continent are up 2.8 percent this year amid data revealing a collapse in China’s trade because of pressures from U.S. tariffs. Indian stocks have stagnated in 2019 as oil prices increased.

--With assistance from Aline Oyamada.

To contact the reporter on this story: Srinivasan Sivabalan in London at ssivabalan@bloomberg.net

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Rita Nazareth, Alec D.B. McCabe

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