Current stock market weakness in Brazil has created opportunities to buy good companies that were previously too expensive. So says a senior portfolio manager at NN Investment Partners, a self-styled equity emerging markets boutique.
Ivo Luiten commented: “In line with our investment philosophy, we see the current market weakness as an opportunity to initiate more positions in good companies that were previously very expensive and now trade at more reasonable valuation levels.”
NN IP says that its Latin America fund and its two GEM funds are defensively positioned within Brazil. They have an overweight position in well-managed, financially healthy companies.
They also have an underweight position in the cyclical banks and are invested in exporters that benefit from currency weakness.
Notes on a scandal
- MSCI Brazil dropped 15% in US dollar terms on 18 May
- President Temer implicated in corruption scandal
- News reversed market outperformance gains
“Mr Temer has been the driving force behind Brazil’s reform agenda,” adds Ivo Luiten. “Any news that compromises his position will be used by other political parties to withdraw support for these unpopular reforms or even initiate another impeachment process.”