What Really Drives Latin American Equities


Latin American equities have been on a wild ride in recent years. After heavily underperforming global equity markets until 2015, their fortunes have turned. As pointed by Deutsche Bank AM, the MSCI Latin America Index is up by more than 20% in 2017. They explain that frequently cited reasons for this include political developments in Brazil or expectations about the future path of U.S. trade policy as major drivers for the region’s equity markets. However, a closer look at correlations reveals a different story, as our “Chart of the Week” shows: Comparing the performance of Latin American equities with the MSCI ACWI Metals and Mining Index, one can observe quite a high correlation.

This is all the more surprising, as the overlap between the two indices is rather limited. Hence, investing in Latin American equities seems to be much more a bet on the metals and mining sector than a play of local politics.



Sources: Bloomberg Finance L.P., Deutsche Asset Management Investment GmbH; as of 8/30/17

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.