Vontobel picks Brazil as top choice for emerging market investments

Vontobel Holding AG

31/01/2024 10:35

By Gabriel Araujo
       SAO PAULO, Jan 31 (Reuters) - An asset manager for
Switzerland's Vontobel Quality Growth said Brazil is one of the
most attractive investment opportunities in emerging markets,
predicting a continuing positive trend for the country's
equities and favorable economic backdrop.
    Even after a rally that saw stock index Bovespa  .BVSP  hit
record highs in late 2023, some investors believe Brazil's
equities still have room to run amid discounted valuations,
stronger-than-expected growth and falling interest rates.
    Vontobel Quality Growth, a boutique within Swiss asset
management giant Vontobel, has some $26 billion in assets under
management.
    Brazil "really ticks a lot of boxes for what we're looking
for on a global emerging markets level," Vontobel's portfolio
manager Ramiz Chelat told Reuters, adding he is especially
optimistic about consumer, financial and software plays.
    Low unemployment levels, the ongoing monetary easing cycle,
income growth and the consumer credit cycle now past its worst
are factors supporting the consumer sector, Chelat said, naming
drugstore chain Raia Drogasil  RADL3.SA  and rent-a-car giant
Localiza  RENT3.SA  among potential outperformers.
    Faster growth financials such as Nubank  NU.N  and BTG
Pactual  BPAC3.SA  are also well-positioned in the current
scenario, as well as software firm Totvs  TOTS3.SA , he added in
an interview.
    "We're getting a combination of high quality businesses and
management teams at attractive valuations," Chelat said about
Brazil. "That's unique, I think, in an EM context to have all
those factors generally supportive, plus monetary policy."
    Risks include Brazil's fragile fiscal position, with markets
skeptical about the chances of the government fulfilling its
pledge of eliminating its primary budget deficit this year.
    "But I think we're still heading in the right direction,"
Chelat said. 
    He noted that the fiscal constraint shown by leftist
President Luiz Inacio Lula da Silva's administration in his
first year in office has been better than markets expected 12
months ago.

 (Reporting by Gabriel Araujo; Editing by Steven Grattan, Elaine
Hardcastle)
 ((Gabriel.Araujo2@thomsonreuters.com; +55 11 5047-3352;))