Latin American Equities Close The Year In The Red Despite The Strongest Q4 In 20 Years

Volatility is often the name of the game in Latin America. While 2020 was no exception, global markets also rode the COVID-19 volatility wave (see Exhibit 1). The global pandemic exacerbated uncertainty around the world and all capital markets were affected, particularly during Q1 2020.

In Exhibit 1, we can see that the S&P Latin America BMI experienced the greatest loss (-46.0%) among our major regional indices in Q1, followed by the S&P MILA Pacific Alliance Composite (-37.5%), which represents Latin America excluding Brazil. Latin American equities rose in Q2, roughly in line with the global recovery, but then they lagged in Q3. Propelled by global economic optimism following the announcements of vaccine developments, the S&P Latin America BMI topped the leaderboard in Q4, gaining more than 30%, but it was not enough to recoup losses from earlier in the year, as the index finished the year down 12.9%.

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Similar trends were seen across sectors and countries throughout the year (see Exhibit 2). During the first quarter, all sectors and countries dropped, with Energy and Brazil performing worst. During the subsequent quarters, countries and sectors staged a strong recovery, though some fared better than others—a sign that the pandemic affected some countries and sectors more than others. While Q4 saw impressive returns, with Energy generating the best returns (51.2%), it was the Information Technology (49.2% YTD) and Materials (28.3% YTD) sectors that more consistently contributed to positive performance throughout the year. Materials companies, which include exporters of copper and iron, registered record prices for their exports, since January 2013 for copper and October 2011 for Iron.1

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Among Latin American countries, all flagship indices ended the year underwater when measured in USD (see Exhibit 3). The best performers were the S&P/BVL Peru Select 20% Capped Index, down 0.4%, and Mexico’s S&P/BMV IRT, down 1.8%.

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