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Not long ago, Indian stock markets were defying
gravity with equity indices zooming
past 21,000 points. The economy was growing at
more than 9%, Foreign Institutional Investors
(FIIs) poured in $19 bn in 2007, and inflation was
under control during the beginning of 2008.
However, within a span of seven months, the tables have turned upside down and investors have been left
quite shell-shocked with the indices losing more than 40% and the threat of deflation looming large on
the economy. Against this backdrop, ING Mutual Fund recently launched a feeder fund, `ING Latin
America Equity Fund' in India. This fund would invest in Luxembourg-based ING (L) Latin America
Fund, which has a good track record with more than 45% returns during the last three years.
The feeder fund will give exposure to the stocks of the Latin American economies such as
Argentina, Brazil, Chile, Colombia, Mexico and Venezuela, which have, so far, not moved in correlation with
the US slowdown. Factors such as volatility, commodities super-cycle, currency fluctuations, surging
exports and economic experimentation have played a major role in popularizing the Latin American
Funds (LAFs) that continue to amaze the experts (Refer Table 1 for the performance of two LAFs). The
one fascinating factor about the Latin American markets is their strong earnings growth momentum,
and relatively low valuations. Latin American equities have emerged as the best-performing equity
asset class over the past one year, and Bovespa's (Brazil's stock index) performance has been remarkable
in particular, allowing it to become the world's largest emerging equity market.
With a minimum fanfare, Latin American stock markets have been able to deliver unbeatable
returns for most of the last decade. During the first week of June 2008, the Morgan Stanley Capital
International (MSCI) Latin America equity price index showed a growth of 11.6%, while the MSCI
Emerging Markets index shed 5.8% and the MSCI World index dropped 5.3% of its value during this
period. Also within Latin America, the MSCI Brazil stock index climbed 13.5%, while Argentina's stock
index rose an even higher to 23%. In addition, Colombia's stock market jumped 17%, and Mexico's
stock market leapt 7% all in the same year. Evidently, this performance is not just a one-off event. Over
the last five-year time, Latin America has been collectively the best performing stock market region in
the world on an annualized-return basis. (Refer Table 2 for the performance of the top 10 markets).
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