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Latin America Debt Set for a Comeback as Politics Give a Break

 1 year ago
source link: https://finance.yahoo.com/news/latin-america-debt-set-comeback-170000848.html
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Maria Elena Vizcaino and Leda Alvim
Tue, December 13, 2022, 12:45 AM·5 min read
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Latin America Debt Set for a Comeback as Politics Give a Break

(Bloomberg) -- Latin America’s bonds are poised for a comeback in 2023, with investors planning the perfect moment to pounce on bargains before a Federal Reserve pivot and China’s reopening send them soaring.

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Dollar-denominated debt from Latin American governments and companies has handed investors returns of more than 10% so far this quarter, outperforming all other regions in an emerging-market index that has returned 7% in that period. China’s move away from Covid Zero, the potential end of the Fed’s interest-rate hiking cycle and quieter politics could all help the region’s notes shine even brighter in the new year.

“Latin America will be one of the most favored regions, and as a result, sovereign credits should perform quite well,” said Graham Stock, a strategist at Bluebay Asset Management in London, who favors cheap bonds from Ecuador and Argentina. “Growth in China is likely to accelerate in 2023. High commodity prices and increased Chinese demand add important support for the region.”

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Large commodity exporters such as Brazil, Chile and Peru should benefit from increased demand from China as Beijing shifts away from its Covid Zero policies and stresses government support for its beleaguered property market. The region is also less exposed to Russia’s war in Ukraine, which will likely continue to weigh on emerging European credits.

“Latin America is not a screaming buy, but we do expect some modest outperformance,” said Jared Lou, a portfolio manager for emerging-market debt at William Blair Investment Management in New York. “Even if we’re no longer in the commodity super cycle, we are still constructive on commodity prices due to supply constraints and expectations of China reopening.”


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