Latin America Equity Strategy: Mid-Year Performance Review; What Worked and What Did Not

研报英文原文证据摘录

Latin America Equity Strategy: Mid-Year Performance Review; What Worked and What Did Not

IdeaM

Overview

Year-to-date, amid volatile equity markets, our LatAm Model Portfolio has

outperformed the MSCI Latin America by 5.4 p.p., while our Brazil and Mexico

portfolios have outperformed their respective benchmarks by 2-4 p.p..Country and

theme diversification (i.e, energy, utility generation for AI, Brazilian financial services, gold,

copper, lithium, Nearshoring, and Andean Spring) have contributed to the positive

outperformance of our LatAm Model Portfolio (+17% absolute return in US$ terms, +5.4%

in relative terms vs MSCI Latin America), In Brazil, our more modest outperformance

(+2.0% vs the IBx-50 benchmark) is mainly explained by our long-standing OW in PBR, and

having avoided 9 out of the bottom 10 underperformers in the benchmark YTD. Finally,

our Mexico Model Portfolio has also moderately outperformed the MSCI Mexico

benchmark (+3.8%).

Exhibit 3: Year-to-date, amid volatile equity markets, all of our Exhibit 4: ...have outperformed their respective equity

LatAm Model Portfolios... benchmarks*

MS portfolios absolute perf. (USD; rebased) MS portfolios relative perf. (USD; rebased)

150 108

Latin America MP Brazil MP Latin America MP Brazil MP

140 Mexico MP Mexico MP

104 104

102 102

90 98

Jan-26 Feb-26 Mar-26 Apr-26 May-26 Jun-26 Jan-26 Feb-26 Mar-26 Apr-26 May-26 Jun-26

*LAMP benchmark: MSCI Latam total return. BMP benchmark: IBx-50. MMP benchmark: MSCI Mexico Source: Bloomberg and Morgan Stanley Research

total return. Source: Bloomberg and Morgan Stanley Research

Our view and allocation

LatAm equities will benefit from a cyclical recovery driven by the US and the

global capex cycle. This cycle is driven by geopolitics, shifts in local policy, and the