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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。

6 tests for Latin American equities’ health in 2018

6 tests for Latin American equities’ health in 2018

Jorge Amato

By Jorge Amato

Head - Latin America Investment Strategy

Joseph Fiorica,

January 29, 2018Posted InEquities

We have selected 6 tests to monitor the health of the immune system underlying the economic and market expansion:

1. OECD Leading Indicators: Economic data in Latin America’s two largest economies have diverged as Brazil continues to improve after a deep recession while Mexico is showing signs of slowdown. Political risks, slow recovery from natural disasters, and above-target inflation are all contributing to a lackluster Mexican economy.  Brazil should continue to see stronger data in the 1st half of the year but could slow down ahead of the elections.

          

Source: Bloomberg as of December 2017

 

2. Earnings: After 2 years of 50+% earnings per share (EPS) growth for the MSCI Latin America index, estimates for continued profit growth in 2018 and 2019 are more moderated. If these forecasts are realized, returns in 2018 are unlikely to be as spectacular as they were in 2016 and 2017 but double digit EPS growth should remain an attractive proposition for investors.

            

Source: Bloomberg as of December 2017

3, Political climate: Major elections across Latin America next year may lead to heightened financial market volatility in the months ahead. As familiar candidates in Brazil (Lula) and Mexico (Lopez Obrador) look to launch bids again in 2018, past elections indicate that polling in the weeks before elections could lead to notable FX market volatility.  Opportunities should arise as the nominal exchange rates act as pressure valves as uncertainty builds up.

             

Source: Bloomberg as of December 2017

4. Commodities: Commodities have stabilized after their major declines in 2014 and 2015, providing footing for Latin American equities to outperform in 2016 and 2017. We expect commodities to trade relatively range-bound in 2018 with some select commodities increasing slightly above current levels. For example, copper prices are expected to remain above $7,000 ($/metric ton) in 2018 as global demand remains strong while supply disruptions subdue mining output. Higher copper prices would be supportive for copper exporters like Chile and Peru. Synchronized global growth should sustain healthy demand to counteract global oversupply.

           

Source: Bloomberg as of December 2017

 

5. Fiscal Deficits and Structural Reform: Risks to continued growth throughout the region include fiscal deficits and the need for structural reform. In Brazil and Argentina, curtailing unsustainable government spending has been a priority for ruling governments to satisfy creditors and continue encouraging new investors. Other structural reforms in Colombia and Mexico could be disrupted next year if elections drastically alter the ruling government coalitions.

             Source: Bloomberg as of December 2017

Source: Bloomberg as of December 2017

6. NAFTA: A breakdown in NAFTA renegotiations remains a risk to the economies of all three North American countries. The Mexican peso has been volatile since the US presidential election in November 2016 as markets price in risks of disruptive trade frictions between Mexico and its northern neighbor. Either a “market-negative” Mexican presidential election result or a breakup of NAFTA in 2018 would likely be negative for the peso in the short term. However, we believe that as long as the Mexican government remains open to liberal economic policies, even a breakup of NAFTA would not necessarily be lethal for the Mexican economy in the medium or long term.

   

Source: Bloomberg as of December 2017