“It is not difficult to understand why Brazil has become an increasingly popular choice for overseas investors,” says Investors Chronicle.
Falling public debt and a move away from state interventionism by President Lula attracted investors initially and the strong performance of the Bovespa index has kept them coming – the market is up 37% in the year so far.
And with a 68% Brazil weighting, the Merrill Lynch Latin American Investment Trust (MLLA) is one of the best ways to play the country.
Run by Will Landers, a Brazilian by birth, the fund is up 434% over the past five years, as companies such as Petrobas and CVRD have ridden the commodities boom. Valuations remain, “very attractive despite good growth in recent years”, Landers tells the FT.
Banks such as Banco Bradesco are benefiting from stronger consumption. “Inflation has declined, interest rates are declining. Because of that, banks are now able to grow their loan portfolios much more aggressively,” Bear Stearns analyst Saul Martinez tells CNN.
The US slowdown has seen the fund cut its exposure to Mexico, where the economy is more closely correlated with America’s. But Landers remains upbeat on Brazil, where he expects earnings to grow by 15%-16% next year; the market trades on 11 times expected 2008 earnings. “Some feel recent performance is forming a bubble. But it is hard to say it is a bubble when you consider the numbers we are looking at. We are definitely in a good spot here,” he tells Investment Adviser.
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Merrill Lynch Latin American Investment Trust top ten holdings
Name of holding
1. All America Latina Logistica SA
2. America Movil SAB De CV
3. Banco Bradesco SA
4. Companhia De Bebidas Das Americas
5. Companhia Vale Do Rio Doce
6. Petroleo Brasileiro SA Petrobras
7. Tenaris SA
8. Unibanco Uniao De Bancos Brasileiro
9. Usinas Sid Minas Gerais Usiminas
10. Wal-Mart De Mexico SAB De CV