Latin America ETFs boom early in 2019

by , 10th January 2019

The Latin America region had a busy 2018 with Donald Trump pressing the progression of the wall between Mexico and the US as well as Brazil electing a right-wing president. But how has the market been reacting to this news?

For the most part, Latin American ETFs have had a very positive start to the new year, producing some of the largest returns so far in the short space of time. Behind the likes of the Biotechnology and energy infrastructure sectors, Brazil, Mexico and Latin American ETFs are up there producing double-digit returns or just shy of, according to justETF.

Brazil

Brazil ETFs have especially produced attractive returns in the first 10 days of the year, since Jair Bolsonaro assumed office. Being one of Latin America’s largest economies, the countries GDP growth is expected to jump to over 2.37 per cent this year and level out to 2.22 per cent by 2021.

Four out of the five available Brazil ETFs on justETF have produced double digit returns. The biggest returner being Amundi MSCI Brazil UCITS ETF with 13.14 per cent. The largest of ETFs in terms of assets is the iShares MSCI Brazil UCITS ETF (Dist) with £339m but producing the lower end of returns of 10.56 per cent.

ETF                                                                                              Return

Amundi MSCI Brazil UCITS ETF                                          13.14 per cent

HSBC MSCI Brazil UCITS ETF                                               11.41 per cent

Xtrackers MSCI Brazil Index UCITS ETF                           11.32 per cent

iShares MSCI Brazil UCITS ETF (Dist)                                10.56 per cent

iShares MSCI Brazil UCITS ETF (Acc)                                 8.38 per cent

Mexico

Mexico has been in the news a lot in the last few months but not necessarily all good news for the market. Trump is still adamant a wall is to be built across the border of US and Mexico and will be funded by Mexico. However Mexico’s benchmark index has reached a two month high following the news of expected tax cuts for companies choosing an Initial Public Offering. With more shares becoming available as companies are likely to choose an IPO, it is expected a lot of capital is to be inbound for Mexico.

ETF                                                                                              Return

Xtrackers MSCI Mexico Index UCITS ETF                         7.55 per cent

HSBC MSCI Mexico Capped UCITS ETF                            8.73 per cent

iShares MSCI Mexico Capped UCITS ETF                         8.38 per cent

Latin America

As a result of the above news, Latin America ETFs are following suit showing similar returns. This could suggest that South America is looking financially promising for 2019, however this could also be a result of good timing with the January effect. The January effect being the spike in the price of shares in the first few weeks of the year as investors return to work after Christmas and proceed in large volume purchases.

ETF                                                                                              Return

Amundi ETF MSCI Emerging Markets Latin                     11.18 per cent
America UCITS ETF

iShares MSCI EM Latin America UCITS ETF                    10.23 per cent

Lyxor MSCI EM Latin America UCITS ETF                       10.11 per cent

Xtrackers MSCI EM Latin America Index Swap                9.30 per cent

HSBC MSCI EM Latin America UCITS ETF                       8.97 per cent