Credit Suisse Asset's Sterling: Brazil Market Comment
New York, Jan. 12 (Bloomberg) -- Credit Suisse Asset
Management's Bill Sterling, global head of equities, comments on
the outlook for Brazilian and other Latin American economies and
stock markets.
Credit Suisse Asset Management oversees about $142.3 billion
worldwide, of which about $35.6 billion is managed from New York:
''When we look around the world, from a valuation
perspective, whether it's price-to-book value or price-to-cash-
flow, Latin America looks to be among the cheapest regions of the
word, if not the cheapest region.''
''That said, it does look as if Brazil is going to
experience a recession this year that will bring GDP down
anywhere from 2 to 4 percent.''
''The big question is whether they can experience all that
pain without eventually having to let the currency slip, perhaps
substantially. Whether that means accelerating the rate of
decline of the adjustable peg of the real, or eventually having
an outright devaluation is anyone's guess.''
''There are increasing concerns about whether fiscal reforms
that are part of the IMF medicine for Brazil will be able to be
carried through, given the fact that one prominent state in
Brazil has imposed a debt moratorium and is not paying the
federal government back its debts.''
''So we think the risk profile in Latin America still
remains quite high. From a three- to five-year perspective, this
may actually be a very good time to be looking at Latin markets
in general, but looking out over the next couple of quarters, we
certainly think the possibility to provide tremendous volatility
is there.''
''In addition, a fair amount depends on the Fed. If, as we
believe, the Fed is likely to go into a passive mode for a number
of months -- we don't expect it's going to cut rates again this
quarter -- that's not helpful for emerging markets in general,
but especially ones that are under great stress, which is the
case for Latin America at the moment.''
''We are minimally exposed in our global equity funds to
Latin America, but we are keeping our eyes open for a buying
opportunity. If a devaluation were to occur that would be a time
to re-assess the situation.''
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