Download PDF: Downgrade Chile and Peru to Underweight Our recommendation to trim exposure to Chile and Peru is driven by three things: downside risk in copper price, rising political risk, and aggressive tightening by both countries’ central bank. Slowdown in Chinese growth is going to weigh on commodity intensive Latam bourse heavily through the declineContinue reading “Negative Outlook: Chile, Peru and Brazil”
Tag Archives: brazil
USDBRL – Better Entry Point Ahead
We are currently cautious on the BRL. Although valuation is cheap, deceleration in global growth and rising downside risk for global equities and commodities mean there will be a better entry point to short USD/BRL. Shorting EUR/BRL is a more attractive trade given the risk of a stronger dollar in such macro environment. First, theContinue reading “USDBRL – Better Entry Point Ahead”
Brazil: Fiscal Crisis in the Making?
Download PDF: The Brazilian 10-year bond yield has continued to shoot up to 11% this month amid the political debacle in the country and lack of credible proposal from the government to reign its growing public debt. A hawkish Fed, deterioration in Chinese growth and flareup of the pandemic globally all point to downside riskContinue reading “Brazil: Fiscal Crisis in the Making?”
EM Review: Chile, Brazil, Indonesia and Mexico
Download PDF: Chile The cyclical bullish case for Chilean stocks is straightforward. Chilean earnings are set to improve dramatically from the higher copper prices, which will continue to enjoy structural boost from electrification of vehicle and green energy infrastructure demand, as discussed in a previous report. Chinese imports continue to pose strong number in recentContinue reading “EM Review: Chile, Brazil, Indonesia and Mexico”
On Brazil and Turkey
Download PDF: Stay Positive on Brazilian Assets The backdrop for Brazilian assets remains bullish amid rising commodity prices and undervalued Real (Chart 1). In addition, Brazilian economy has recovered strongly and various indicators – such as manufacturing PMI and retail sales – are now back to pre-pandemic level (Chart 2). With the global economy continueContinue reading “On Brazil and Turkey”
February 2021: EM Bonds, Brazil and Turkey
Download PDF: EM local-currency bonds EM bonds still have room for spread tightening against U.S. Treasury. The 10-year Treasury yield will have difficulty to break 1.2% level as the Fed is unlikely to raise rate until inflation overshoot its 2% target, creating an anchor for yields globally to remain low. Moreover, the relatively modest fiscalContinue reading “February 2021: EM Bonds, Brazil and Turkey”
A Tale of Two Latam Countries: Brazil and Mexico
Download PDF: Brazilian manufacturing sector’s recovery has been surprisingly strong post-pandemic, outpacing other EM countries, despite the still poor health care situation and strict lockdown restriction nationally. However, the strong rebound has not been followed proportionately by the country’s asset prices, contrary to the development seen in Mexico (Chart 1). The country still records contractingContinue reading “A Tale of Two Latam Countries: Brazil and Mexico”
Revisiting Our View on Brazil, Mexico, Turkey, and South Africa
Download PDF: Brazil: Negative Outlook Valuation is dearer than the average EM countries, although the rout has knocked out excessive valuation for Brazilian stocks. Book value multiple has indeed declined from 2.3x to 1.8x currently, but weak profitability due to depressed commodity prices has translated into an expensive forward earnings multiple at 14x, which isContinue reading “Revisiting Our View on Brazil, Mexico, Turkey, and South Africa”
LATAM Countries Revisited
Download PDF: LATAM Countries Revisited PC Argentina The Fernandez government is taking a hard stance on the debt renegotiation, postponing interest payment until 2023 and forcing a 5-12% haircut on the bond principal value. The “Globales” bond’s principal under restructuring amounts to 6.7% GDP and its annual interest expense close to 0.4% GDP. The keyContinue reading “LATAM Countries Revisited”
Assessing the Risk of Banking Crisis in Turkey, Russia, Mexico and Brazil
Download PDF: Assessing EM Risk Apr20 The Framework: The starting point is to analyze on a big picture scale, which EM countries will potentially undergo a banking crisis arising from the combination of unsustainable hard-currency debt and FX collapse in the current rout. Indonesia, South Africa, Chile, Mexico and Turkey are particularly vulnerable due toContinue reading “Assessing the Risk of Banking Crisis in Turkey, Russia, Mexico and Brazil”
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