REGIONAL REPORT
exotic,” says Ismael Perez. “They don’t understand WKH GULYHUV 7KH LQVWLWXWLRQDO LQYHVWRUV ÀQG LW GLIÀFXOW to explain to end clients.”
For currency investment in Latin America there is a bit of a mountain climb yet but in a region where exchange rate volatility is common, in general rates of LQÁDWLRQ EXUJHRQ DQG LQWHUHVW rates are high, currencies appeal in terms of carry, speculation, diversity and non-correlation.
The outlook therefore is strong both for foreign investors in the region and for local people with wealth to invest. “As we go forward we will look at other Latin American type trades,” says Barings’ Colin Harte. “We’ll look at more value trades between one Latin American currency and another rather than playing it on balance with a Latin currency against a G10 currency… It is the same as with Asian markets. These markets are going to
develop and have different regimes, and central banks will be using currencies as a policy control tool for macro economic management and this will create opportunity in Latin America.”
“I am really optimistic,” says Ismael Perez. “The potential is very interesting for currency managers in the region. There are not too many here and investors are realising that adding a currency manager to their portfolio lowers their volatility. It is a great opportunity here now.”
How dependent this scenario will be upon continuing high-level commodity prices generating new wealth remains to be seen. Doomsayers point WR JURZLQJ LQÁDWLRQ DQG
falling real growth rates in Asia as a sign that the Latin American
wealth boom may be over.
Others, more bullish about the region, point to the growth of internal demand within economies such as Brazil, Colombia and Mexico. They say that the economic powerhouses of Asian emerging markets are likely to continue to stoke demand for mineral and agricultural commodities as well as for hydrocarbons for the foreseeable future and so Latin America will continue to meet some of this need.
“The potential is very interesting for currency managers in the region. There are not too many here and investors are realising that
adding a currency manager to their
portfolio lowers their volatility.”
What is for sure is that Latin American currencies are on investors’ radar as never before. If emerging market currencies were once too exotic and too illiquid for many tastes, routes to market through major banks and traders, as well as through funds, are well and truly open for investors to explore and
ISMAEL PEREZ
more are now seizing the opportunity to do so it seems.
RICHARD WILLSHER
Autumn 2011 | Currency Investor 81
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