Investors go for liquidity, dividends in Latam
By Gilles Castonguay
NEW YORK, Sept 10 (Reuters) - The few foreign investors who are trying to ride out the financial storm in Latin America are putting their money in liquid stocks with high dividend yields, according to market observers
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Brazil, whose stability is key to the region, has come under tremendous pressure since Russia's financial crisis sent most investors scrambling out of emerging markets.
''Given the prices right now, there are a lot that are yielding in the teens,'' said Barrineau. ''Dividend does give some downside protection, but people (are also) gravitating to liquid, big-name stocks.''
The dividend yield is the ratio between the dividend and the stock price.
Barrineau cited phone company Telefonos de Mexico (NYSE:TMX - news), brewer Grupo Modelo and Grupo Televisa, with its high ratio between cash and short-term liabilities, as solid investments.
Liquid stocks can usually be sold quickly in case of an emergency.
Moira McLachlan, an equity strategist for Ivy Mackenzie, said the region's markets were at their lowest valuations relative to U.S. stocks in more than a decade. (Ed. note: Don't tell me its not time to buy).
''It's too cheap to pass up,'' she said.
McLachlan said the mutual fund family was buying into big names like Brazilian telecommunications giant Telebras (NYSE:TBR - news), Mexican soda bottler Panamerican Beverages (NYSE:PB - news), and Banco de Galicia y Buenos Aires.
Peter Ryan, a Credit Lyonnais trader, said investors who were still active in the region were few and far between.
''I'd still say that its 80 percent sellers and 20 percent buyers,'' he said. (Ed. note - ibid the last comment).
Robert Fleming's Stoeppelwerth agreed. ''It's difficult for a fund manager to wake up everyday to see stocks go down everyday,'' he said. (Ed. note: Pass me the freakin' violin already.)
The average of a group of 48 open-end mutual funds invested in Latin America were down 44.3 percent year to date as of the end of August, according to Morningstar Mutual Funds.
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