Latin American stocks rose broadly in 2012, with Mexico's IPC index outpacing Brazil's Bovespa and Chile's IPC, though constant concerns over global economic growth and the euro zone debt crisis kept investors on edge. Brazilian stocks whipsawed throughout the year as concerns over Europe's debt crisis, weak economic growth and government intervention in the private sector offset the potential benefit from abundant global liquidity and lower interest rates.
Still, many analysts see room for Brazilian stocks to rise in 2013 alongside an improvement in the economic outlook, both domestic and abroad. Brazil's benchmark Bovespa index closed up 0.89 percent on Friday for a 2.35 percent weekly gain, as steelmakers and banks rose. This year's 7.4 percent gain was a stark improvement from 2011's loss of more than 18 percent. But the gain was far short of the more than 23 percent rise predicted in a December 2011 Reuters poll.
--- Brazil's Bovespa lags Mexico's IPC
Investors were optimistic at the start of the year as an injection of liquidity by the European Central Bank and record-low interest rates in Brazil fed risk appetite and drove investors toward cheaper stocks with higher potential yields. Optimism soon turned to fear in the second quarter, however, as mounting concerns over the euro zone debt crisis fuelled a rapid exit from Brazilian equities and pushed the Bovespa back into the red, where it would mostly remain for the rest of the year.
While stocks posted a slight recovery in the fourth quarter, gains were limited by concerns over mediocre economic growth in Brazil and heavy government meddling in the private sector. "2012 was a complicated year," said Illan Besen, an equities specialist at brokerage ICAP in Rio de Janeiro. "It was a year of mismanagement by the Brazilian government in some sectors of the economy and a year when China cut its growth projections, which affected prices for some of the most heavily weighted stocks, such as Vale and Petrobras."
While a recent Reuters poll showed that investors are not as optimistic about the Bovespa for 2013 as they were for 2012, most analysts expect the index to post modest gains alongside a steadily improving global economic scenario. "We may begin to see an improvement in domestic activity at the beginning of 2013, with more foreign inflows to the Bovespa," said Luis Gustavo Pereira, a strategist with brokerage Futura Corretora in Salvador, Brazil.
Mexico's IPC index rose 0.58 percent to 43,721.93 on Friday, ending the week flat, but contributing to a 17.92 percent gain for the year. Monday's session will be the IPC's last of the year. The IPC's performance, which outpaced the S&P 500 index's 12 percent rise in 2012, was based on growing investor confidence in the country's finances, an improvement in the US economy and optimism that Mexico's newly elected government would enact wide-ranging economic reforms. "The deficits are controlled, the exchange rate is manageable, we have plenty of foreign reserves, both internally and in terms of a credit line with the IMF with which we can steel against any external shock," said Esteban Velasquez, head of market analysis for fund distributor Allianz Fondika in Mexico City.
Chile's bluechip IPSA posted a 0.16 percent gain on Friday as investors moved around their portfolios in a high-volume, pre-holiday session, leaving its accumulated gain in 2012 at just under 3 percent. Disappointing corporate earnings - due to high energy costs, rising wages and a corporate tax hike - and a slew of capital increases weighed on the IPSA this year. The local index would have ended in negative territory if not for a nearly 4 percent increase in December.
Comments
Comments are closed.