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Brazil in Spotlight as Appetite for Latin American Stocks Rises

Carolina Millan and Vinícius Andrade
Brazil in Spotlight as Appetite for Latin American Stocks Rises

(Bloomberg) -- Brazil is the country of the future, or of 2019 at least, money managers say.

Stocks in Latin America’s biggest economy will be the top performer in the region this year, according to 68 percent of respondents in a survey of investors that attended Banco Santander’s annual Latin American CEO conference. Another January survey by Bank of America Merrill Lynch showed about 90 percent of respondents expected the country’s stock gauge ending the year above current levels.

Brazil’s equity benchmark Ibovespa index is already up 8 percent this year, led by state-run companies, as investors bet the new administration will deliver on its market-friendly promises from privatizing companies to moving forward with pension reform. The index is currently trading at a record high and the median forecast of strategist estimates sees it closing 2019 at 105,950 -- an 11 percent upside from current levels.

The Bank of America Merrill Lynch survey found that 91 percent of participants believe the long-awaited pension reform will be approved some time in 2019 and one-third of investors expect its approval in the first half of the year. Almost half of the respondents on Santander’s survey expect approval in the second half of the year.

Argentina, which is going through a presidential election year, was seen as the second best choice by Santander’s respondents, while those surveyed by Bank of America saw a quarter of investors planning to increase their allocations in the country and none reducing them. The benchmark S&P Merval index has gained 15 percent this year in dollar terms, the most among primary indexes, after wiping out more than 50 percent of its value in 2018.

Investors in Latin American stocks will be most focused on reforms and political developments in the region, then trade tensions between China and the U.S., global commodity prices and then the pace of Fed increases, according to the Santander survey.

To contact the reporters on this story: Carolina Millan in Buenos Aires at cmillanronch@bloomberg.net;Vinícius Andrade in São Paulo at vandrade3@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Philip Sanders

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