He says: “We like to take duration exposure in Mexico. The central bank did a good job at anchoring inflation expectations and is now viewed as a very credible and independent institution.”
Mike Ingram, chief market strategist at WH Ireland, says there are attractive corporate credit opportunities in the oil and gas sector as well as utilities, consumer discretionary and banking sectors.
“While weaker credits have been disproportionally punished in the recent market downturn, continued uncertainties centred around higher interest rates and global trade are likely to keep the market environment volatile,” he says. As such, he says this type of market will present tactical opportunities to move into higher quality issuers.
Taking it in their stride
With central banks around the world tightening monetary policy, the US threatening trade wars with its global partners, and the economic cycle arguably nearing its end, it stands to reason that bond investors may be nervous about the outlook for Latin America. However, investors appear to be taking all of this in their stride.
Paul McNamara, investment director at Gam, explains: “Latin American society and politics has traditionally traded off economics, which in turn has been largely driven by the interaction of commodity prices and global liquidity.
"The region is fairly well insulated from global concerns, including US politics. The key exception is Mexico, but even there the recent USMCA replacement of Nafta looks sufficiently better than the worst-case scenario to leave little danger to the status quo.”
While many investors have been prudent with their positioning amid 2018’s busy election cycle in the region, it is likely the recent outcome of Brazil’s election will see a return of portfolio inflows and foreign direct investment.
Mr Marechal adds: “We saw the same thing happening earlier this year with Colombia, Mexico and at the end of last year with the Chilean elections.
"Each time, the market participants were prudent with their positioning going into the elections and then bought once the uncertainties were removed.”
Geordie Clarke is a freelance journalist
