Copper’s Surge Makes Latin American Stocks Look Historically Cheap

Copper’s Surge Makes Latin American Stocks Look Historically Cheap
Andrew Rummer

almost 3 years ago1 min

Stocks in Latin America – an economy dominated by mining and demand for industrial metals – look like relative bargains if their historical relationship with copper is any guide. 

As the chart above shows, the ratio of MSCI’s Latin America Index to the MSCI All-Country World Index of global stocks (plotted in pink) has tended to track the price of copper (in blue) over the past decade. Over the past 12 months or so, however, the salmon-pink metal has surged higher while Latam stocks have languished. 

The price of copper and other metals have climbed as investors anticipated that the global economy – and particularly demand from China – will quickly recover from coronavirus. Latin American nations, meanwhile, have been among the worst hit by the pandemic, prompting many investors to flee. 

Those willing to bet that Latam stocks will rebound once South America finally shakes off COVID could try the iShares MSCI EM Latin America exchange-trade fund, which tracks MSCI’s Latin America Index.

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