Brazil's Bovespa stock index will end the year a little stronger as government fiscal discipline encourages bargain-hunting from foreign investors, a Reuters poll predicted on Monday. The same survey of stock markets strategists and analysts forecast a modest gain in Mexican shares that will likely be limited by an eventual hike in US interest rates.
Brazilian stocks have dropped 18 percent over the previous two years as investors anticipated the current recession - seen as the worst in a quarter century.
In dollars, Brazilian stocks are trading near Lehman crisis levels after plunging more than 50 percent since mid-2011.
The lower share prices has helped maintain interest among foreign investors despite expectations for higher interest rates in the United States. So far this year, foreign investment flows into the Bovespa have reached a net positive 21.3 billion reais ($6.85 billion), driving the Bovespa index 8 percent higher.
The appeal of Brazilian shares could be supported by expectations for a stronger economy in 2016 given recent government efforts to rebuild market confidence, some survey participants said. But any rebound is likely to be fragile, they added, pointing to continued turbulence as high inflation and political uncertainty add to risk.
"The fruits of the government's actions now will be seen in the year to come," said Ariovaldo Santos, a trader with H.Commcor in Sao Paulo. "For now, investors will need to cherry-pick specific opportunities in sectors such as infrastructure and oil, because the days of investing in Brazil as a broad growth story are over."
On average, the 13 analysts polled saw the Bovespa hitting 56,000 points by year-end, almost a 4 percent rise from Friday's close of 54,016.97.
Mexico's IPC stock index should also continue to rise through the end of the year, forecasters said, bouyed by improving economic growth in the United States, Mexico's top trade partner.
The outlook for local shares will depend on Mexico's ability to retain investment flows in the case of higher US interest rates, according to Esteban Velazquez, an analyst at Allianz Fondika in Mexico City.
The median forecast from 12 analysts suggested the index would climb to 47,275 by year-end, a 4 percent gain from Friday's close of 45,566.33.
Most analysts polled said the Mexican central bank's response to higher US interest rates will be a key factor in the investment outlook.
Latin American stocks are likely to underperform Asia's, partly because of central bank policies, according to a separate poll.
While China and other Asian central banks are likely to add stimulus to their economies, Brazil's central bank is pushing interest rates towards 14 percent to fight inflation and Mexico's is expected to follow the Federal Reserve and raise interest rates later this year or in 2016.
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