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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-equities-strengthen-despite-challenging-global-backdro

Latam equities strengthen despite challenging global backdrop

Jorge Amato

By Jorge Amato

Head - Latin America Investment Strategy

May 3, 2018Posted InInvestments, Equities and Investment Strategy

Global financial markets have had a rough first quarter. Performance has been influenced by increased uncertainty over growth expectations. Inflation and protectionism fears have fuelled volatility and created doubts in investors’ minds.

However, Latin American markets’ Q1 performance has been strong, outperforming other financial markets. The Latam MSCI gained 7.24%, local currency bonds (Barclays Unhedged) were up 6.4%, external debt (Barclays USD) lost 1.8% on the back of higher U.S. yields while a basket of currencies (JP Morgan LACI) was up 2.21%

While we hold a positive outlook for the cyclical economic recovery in the region, we acknowledge that the global backdrop has become more challenging. However, we are yet to see convincing evidence that suggests that a sharp deceleration in global growth is imminent.

Regional macro dynamics remain constructive with growth expected to accelerate in 2018, inflation measures reveal a constrained outlook for prices and consumer confidence is rising. Region specific risks seem, for the moment, to be contained to political events.

In Colombia, the presidential race is pointing to a center-right economic conservative -Mr. Duque- which should be welcome by markets and allowing for the current expansion to continue.

In Mexico, presidential candidate Lopez Obrador is consolidating his lead, generating anxiety, uncertainty and pressure on the currency market.

Finally, in Brazil, ex-President Lula’s chances for a potential run should to have come to an end with the Superior Electoral Court (TSE) rejecting his appeal and ordering his arrest. With Lula out of the race, the probabilities of a left wing populist candidate fall significantly in our view. This race is still in its very early stages but as of this writing the chances for a moderate center right candidate have increased but are far from guaranteed.

While we recognize that at the margin the risk adjusted return is not as attractive as before, the GIC maintains its positive outlook for Latam markets given attractive absolute and relative valuations while keeping an eye on political events that might disrupt the broad view.

We are overweight Brazil, Argentina and Colombia and market weight Mexico, Chile and Peru. We recommend an overweight exposure in local markets, equities and external debt. Our view on the region’s nominal FX basket is neutral.

The main risks for market performance in the region are broadly exogenous but with pockets of localized political risk. Continued developed equity market weakness could negatively impact absolute Latam returns.