April 11th

Espresso for April 11th

 

QUOTES OF THE DAY

 

“I’m sorry this government had allowed not only crime to advance in the streets but has also permitted Shining Path to keep taking lives and shedding blood in our country,” Keiko Fujimori said while celebrating her first-round win in Peru’s Sunday presidential election.

 

 WHAT MARKETS ARE TALKING ABOUT


 

BANK STOCKS HAVING A TERRIBLE YEAR, OUTSIDE LATAM

 

Bank stocks are having a terrible 2016, as central-bank policies—particularly the Fed’s unclear strategy—are hurting the financial sector. U.S. banks begin reporting their 1Q earnings this week. Expect plenty of volatility, as trading revenue is expected to fall. In Latin America, our heat map shows that regional banks have performed eerily, but positively, throughout the year. While Brazilian banks’ ADRs are doing beautifully in the last 3 months (Bradesco +69%, Itau +45%, Santander +30%); followed by Colombian banks (BanColombia +33%, Aval +22%); Chilean banks (Corpbanca +18%, Santander 14%,  Banco de Chile +10%); and the modest Argentine banks (Galicia +5%, Macro 3%, BBVA Banco Frances 0%). The only Mexican bank with ADRs is Santander, up 5% in the last 3 months.

 

PERU’S PRESIDENTIAL ELECTION HEADS FOR RUNOFF


 

With 40% of votes counted (as of 5AM ET), Keiki Fujimori and Pedro Pablo Kuczynski (PPK) are going to face each other in Peru’s presidential election runoff. According to the latest results of the Peruvian Office for Electoral Processes, Keiko Fujimori came first with 39.2% of votes, and Pedro Pablo Kuczynski second with 24.3% of votes. The surprise—for markets’ relief—was seeing Veronika Mendoza come in a far third with only 16.6% of the votes. As no candidate surpassed the 50% threshold, a June 5 runoff is unavoidable. Only Fujimori and Kuczynski will appear on the ballots this time around. Local polls are divided on whether Kuczynski can defeat Keiko on June 5.

FUJIMORI VULNERABLE DESPITE LEAD

Although Fujimori’s lead seems ample, polls show her tied with Kuczynski ahead of the June runoff. Why? There is the clear division between those who support Fujimori and those who does not. Keiko is Alberto Fujimori’s daughter, a controversial president of Peru in the 1990’s, popular for restoring Peru’s macroeconomic stability, but also currently in jail accused for human rights violations.  Keiko is associated with his father’s successes and crimes, which has gained her support in rural areas and an “anti-Fujimori” sentiment in the main cities.   The anti-Fujimori sentiment is Keiko’s Achilles’ heel and an opportunity for Kuczynski. We’ll see.

 

ARGENTINA’S ROADSHOW BEGINS


Argentina makes a historic return to the international capital markets. This week, it begins marketing to investors the bonds it intends to sell. Policymakers and bankers have been separated into two groups — Team White and Team Blue. The road show will begin in London and at the New York Palace in Manhattan on Monday. Bankers and Argentine policymakers are also scheduled to travel to Los Angeles, Boston and Washington. Argentina will cap its first international bond in 15 years at US$15 billion. The country is targeting maturities of 5, 10 and 30 years on the bond, which is expected to come to market as early as April 18. Officials said the country is looking to raise at least US$12 billion—enough to settle the dispute with hedge funds and resume payments on restructured bonds.

 

 LATAM PM’s LONG-SHORT PORTFOLIO


 

INTRODUCING OUR LONG-SHORT ALL-LATAM ADRs PORTFOLIO

We recently launched our all-LATAM ADRs portfolio. And we are excited. Our portfolio manager (PM) has chosen the following strategy:

Equity Strategy: Short Extension 120/20 full invested. Type:Long-Short. Universe: LatAm ADRs of 70 issuers and 7 Equity Index ETFs. Countries:  Brazil, Mexico, Chile, Argentina, Colombia, Peru. Currency: USD. Rebalancing: Weekly. Benchmark: MSCI LatAm. Stock picking: Technical, Fundamental and Macro Analysis. Inception: March 28, 2016.

Follow more updates here (Espresso).

LATAMPM Portfolio Apr 11

PM: Roberto Barba, CFA

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