Equity Strategies on Track despite Selloff

Global equity losses continued to send funds scurrying for liquidity last week, but investors still point to solid fundamentals in LatAm that the growing crisis hasn’t yet damaged. Pessimism, however, has spilled over into the region’s bolsas. Brazil’s Bovespa, for instance, fell 1.3% Friday, registering a 1.9% loss for the week and a 24.3% dip year-to-date. As happened in 2009, this has left some investors on the hunt for buying opportunities. “If you have a sufficiently long time horizon, it is a good time to think about buying. The fundamentals haven’t shifted much. What is playing out is that the hunt for liquidity is not favorable to EM, and it is caught up in the selloff,” says Chris Palmer, EM equity fund manager at Henderson Gartmore in London. He notes that Brazil, in particular could show the similar type of rebound it did following the 2008-2009 crisis, as growth rates should still remain strong and support corporate earnings. “The recent selloff, as painful as it might have been, didn’t touch key sensitive nerves that could have resulted in far more devastating macro consequences for the region,” UBS says in a report. The new issuance pipeline for the region is another matter, having all but dried up during the last few weeks. Bankers are optimistic that some of the larger and more consumer-focused deals could get done in Q4. However, a lack of filings – only Brazil’s CVC has registered for a new deal this month, with several pulling filings – means a difficult lag time.