Brazil’s stock market is posting some of the cheapest valuations in more than a decade, but one of Latin America’s best-known investors is shifting funds out of the nation’s equities amid growing fears over the outlook for raw material prices.
Instead, Will Landers, the head of equity strategy for the region at Banco BTG Pactual SA’s asset-management unit, is turning to more expensive stocks in Mexico as US companies transfer production away from Asia and closer to home.
“We’ve recently moved to a neutral position on Brazil given short-term concerns about the outlook for commodities, especially iron-ore prices,” Landers said in an interview. “We prefer Chile and Mexico, our sole overweights in the region.”
It’s not an immediately obvious decision. Mexico outperformed its regional peers last year and its stocks currently trade at an average of nearly 12 times their estimated forward earnings — almost twice the multiple for Brazil’s benchmark Ibovespa index. Brazilian stocks extended their year-to-date drop on Tuesday and their P/E ratio now sits at the lowest since 2008.
Even with Mexico’s stocks selling at more expensive prices, the country remains attractive. The political environment is quieter, money from remittances is helping boost the domestic economy, and trade tensions between the US and China are prompting companies to expand their Mexico footprint, according to Landers.
“We like Mexican companies that have a greater exposure to the country’s Northern region” that borders the US, said Landers, who worked for almost two decades at BlackRock Inc. and started at BTG in 2019.