Buy Brazil Stocks, Avoid Mexico on Economic Exposure, Credit Suisse Says

Brazilian stocks are more attractive after the central bank moderated the pace of interest-rate increases and are “less exposed” than Mexico’s to the prospect of a global economic slowdown, Credit Suisse Group AG said.

Investors should remain “overweight” Brazilian equities, buying financial, real-estate and industrial stocks best positioned to gain from domestic growth, analysts including Andrew T. Campbell wrote in a note to clients dated yesterday.

Brazil policy makers’ monetary tightening cycle probably ended with last month’s 50 basis-point rise, according to the note. The central bank in the second half of next year may lower the benchmark Selic rate to 10 percent from 10.75 percent now, Credit Suisse said.

“Brazil is much better positioned to weather less vigorous global growth and especially lower growth in the U.S.,” Campbell wrote.

Brazil is also cheaper, even if the outlook for positive earnings revisions may be more favorable for Mexico, Campbell said. The benchmark Bovespa index trades at 13.2 times estimated earnings, compared to a ratio of 16.4 for Mexico’s IPC index, according to data compiled by Bloomberg.

Lenders Itau Unibanco Holding SA and Banco do Brasil SA and exchange operator BM&FBovespa SA are among the most attractive Brazilian financial stocks, according to Credit Suisse. Investors should also buy homebuilder Cyrela Brazil Realty SA Empreendimentos e Participacoes and auto-parts maker Randon SA Implementos e Participacoes, the analysts said.

The most attractive stocks in Mexico are “defensive” companies in the telecommunications, retail and beverage industries because they’re most insulated from slower U.S. growth, the analysts wrote. Investors should stay “underweight” in the country as inflation will likely quicken, ruling out interest-rate reductions, according to Credit Suisse.

Wireless carrier America Movil SAB and retailer Wal-Mart de Mexico SAB are among the best bets in Mexico, the note said.

To contact the reporter on this story: Alexander Cuadros in Sao Paulo at

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