Citi Private Bank

Browser Requirement

To best view Citi Private Bank's site and for a better overall experience, please update your browser to a newer version using the links below.

System Outage
Citi Private Bank logo

Language Notification

Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Latam-booms-and-busts

Perspectives

Latam booms and busts – We buy the busts

Jorge Amato

By Jorge Amato

Head - Latin America Investment Strategy

September 1, 2020Posted InFixed Income, Investment Strategy and Equities

Latam equity markets have always been a cyclical play, dominated by a confluence of domestic idiosyncratic variables, international financial conditions and commodity markets. Global shocks have historically had an outsized negative impact on the region relative to other markets. 


Averaging the returns from the peaks and troughs of four of the largest market moves of the last 20 years reveals that while Latam equities have been the “Ugly Duckling” of the crisis periods, averaging 44% return draw-downs, they also have the potential to transform into the “Beautiful Swan” when markets recovered, averaging 78% upside. 


We believe this underperformance can be explained by the region’s history and the significant cyclical tilt in its equity indices relative to other regions and to more diversified benchmarks. As our base case scenario for a global recovery materializes into 2021-2022, we expect the global cyclical sectors to recover and outperform. We expect Latam to participate in that move. 


Brazil is our preferred market to play the recovery. Brazil is the largest Latam economy, ranking as the 9th largest global economy in the world with a GDP close to $1.8 trillion. With a population of over 212 million, it has the 6th largest population and one of the largest domestic consumption markets in the world. Finally, it is home to a number of world class companies that add up to an equity market capitalization estimated at approximately $1trn. These characteristics combined result in a large dynamic economy and an investable equity market. 


While we fully recognize the inherent risks of Latam equity markets, we believe current levels are pricing in the widely expected economic and earnings contraction, yet very little of the recovery. The current global economic recovery is unlike any we have seen in recent decades. The path of recovery depends heavily on the development of a vaccine. 


Therefore, a full global economic recovery is likely to take longer than in previous recessions, generating uncertainty and anxiety in investors. Latam markets are usually never the first to bounce. 


Much like our other calls on global cyclicals, small and medium capitalization and value, Latam equities will only consolidate their recovery once investors have confirmation that all is clear on the pandemic front. We have a high conviction that Latam equities will rebound though it will take some time, and we advise investors to position for the potential opportunity. 


Current levels provide enough of a discount to suggest that global investors should continue to diversify and, rightly sized and with an opportunistic and tactical view, own Brazilian equities in their portfolios. The Global Investment Committee has an overweight allocation to Brazilian equities since May.

Read Latin America Investment Strategy