Latin American Stocks Slide To The Cheapest Valuation In 14 Years

Latin American Stocks Slide To The Cheapest Valuation In 14 Years
Andrew Rummer

over 2 years ago1 min

Latin American stocks just keep getting cheaper, with the region’s shares now offering the lowest valuation compared to the rest of the world since 2007. 

The chart above plots the price-to-earnings ratio for MSCI’s Latin America Index compared with the same ratio for the MSCI All-Country World Index of global stocks. A declining line means Latin American stocks are getting cheaper compared to those elsewhere. The ratio dropped to 0.48 last week, well below the long-term average of 0.83.

Investors are shunning stocks in Latin America – an economy dominated by mining and industrial metals – even while they bid up the price of those metals. The chart below shows how the ratio of Latin America stocks to the MSCI All-Country World (plotted in pink) has tended to track the price of copper (in blue) over the past decade – until the relationship broke down last year.

Latin American stocks' relationship with copper

Those willing to bet that Latam stocks will eventually rebound back toward their long-term average could try the iShares MSCI EM Latin America exchange-trade fund (ticker: LTAM), which tracks MSCI’s Latin America Index.

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