Russia Default Redux as Brazilian Stocks Sink: Chart of the Day
Brazilian equities are trading at the biggest discount versus their Mexican shares in 13 years, a sign to PineBridge Investments to start buying consumer stocks in Latin America’s largest economy.
The CHART OF THE DAY shows that the difference between the MSCI Mexico Index’s price-to-earnings ratio on Oct. 21 was the widest versus the MSCI Brazil Index’s since October 1998, when investor concern mounted that Brazil would default after Russia halted local debt payments two months earlier.
MSCI Brazil has plunged 25 percent this year, pushing its price-to-earnings ratio down to 8.5, according to data compiled by Bloomberg. The Mexico gauge has fallen 15 percent this year, leaving its ratio at 22.7.
“There is a lot of value in Brazil but it’s still a stock- pickers market,” Stacy Steimel, who manages $800 million of Latin American stocks at PineBridge, said Oct. 21 in a telephone interview from Santiago. “Interest rates are coming down, and some of the consumer names have been hit. There is such incredible value.”
Brazil’s equity valuations and interest-rate cuts over the past two months provide an opportunity to invest in companies that will benefit from consumers’ growing purchasing power, Steimel said. She said she prefers Marisa Lojas SA (AMAR3) over other retailers such as Lojas Renner SA or Lojas Americanas SA (LAME4) because more of its revenue is dependent on credit growth.
To contact the reporters on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net; Sebastian Boyd in Santiago at sboyd9@bloomberg.net
To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net
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