Hundreds of stock funds have vanished from Latin America's markets, and IPOs have nearly stalled. More than 400 equity funds have disappeared, and that was before Lula's re-election sparked a rout in Brazilian stocks.
Veteran trader Scott Piper, who runs about $5 billion of equities for Itau Unibanco's asset-management unit out of New York, says the region has become such a lonely place to invest that he jokes he's the last of his breed. Funds dedicated to the region peaked at more than 660 in 2015. Today, according to Bloomberg Intelligence, just 226 remain worldwide. The shrinkage reflects economic stagnation since the commodities boom faded some 15 years ago. GDP growth has averaged less than 2% a year, productivity has declined and innovation has dried up.
MSCI's Latin America index remains 40% below its peak. This week's collapse in Brazilian stocks, which triggered a circuit breaker for the first time since the pandemic, made matters worse. Some shares plunged more than 60% after the surprise re-election of leftist President Luiz Inácio Lula da Silva. Over the past five years, only two IPOs raising more than half a billion dollars have taken place in Mexico and Brazil combined, compared with 26 such deals in the US this year alone through Tuesday.
Claudia Mesquita, who runs Brazil equity capital markets at UBS BB Investment Banking in Sao Paulo, calls this the worst cycle she has seen. Even former bulls such as Will Landers, once a major Latin America investor at BlackRock, now view the region as a trade for hedge funds rather than a long-term bet. "We never managed to break out of the boom-and-bust cycle," he says.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing