By Alexander Kalis, Portfolio Manager and Head of Manager Research at Milltrust International
24 Feb 2016 Conference Call


Peru is the biggest overweight in the portfolio as the economic recovery at 6.5% GDP growth is taking place at a faster pace than in the rest of the Latam region. The recovery is being led by mining (copper,…) which is fully operational now. Despite the fall in commodity prices, Peru is a low cost producer and able to generate profits .

  • Overweight financials.
  • Government pipeline of stocks will help diversify infrastructure names primarily.


Chile has gone through a derating because of anti-market friendly reform policies. As a result, corporates have invested less and pension funds withdrew from equities, whilst international investors withdrew their interest. Itau see this cycle coming to an end in the near term.

  • Overweight the utility space which will be supported by El Niño bringing some relief after a 7-year drought.


The country has implemented a number of countercyclical market programs such as the 4G Road Program and other infrastructure/transport investments.

  • Overweight cement companies and airlines (bottom up call).


From a top down perspective the country the team likes best is Mexico. Mexico has undergone a number of structural reforms, especially in the energy space, which will have positive spillover effects on investments. In addition, the growth of the consumer sector has been strong, with positive retail sales, labour, and real wages. The problem has been in finding compelling investment opportunities that are reasonably priced.

  • Continue to like Mexican real estate plays, particularly those with dollarised revenues, and even more so under a scenario of lower rates for longer.
  • Remain overweight Mexican infrastructure stocks, given exciting pipeline of new projects and potential acquisition targets.
  • Gradually rebuilding position in Mexican banks given the now more attractive valuations.
  • Remain with underweight positions in Telecom and Media (T&T) heavyweights, but emphasising the smaller cable companies.
  • Maintain underweight stance in consumer staples and consumer discretionary stocks given high valuations.
  • Continue to hold large positions in some consumer stocks that offer optionality.


The fund is underweight Brazil. The country is facing well publicised problems and uncertainties. The BRL has depreciated significantly this year as a consequence and internal demand has been low.The main problem in Brazil is the fiscal problem. GDP has dropped 4% last year and perhaps 6% this year. This affects fiscal revenues whilst expenditures have remained the same, affecting the fiscal accounts negatively. Ratings agencies have cut Brazil to below investment grade. Impeachment proceedings aside, the government needs to do more although many mistakes of the first term are quietly being addressed. Within the equity markets, differences are emerging between sector performances. i.e. Consumer stocks that had outperformed most of the index in last 4-5 years are now going through a derating process.

  • Moving to overweight in utilities (compelling valuations).
  • Overweight industrials which may be supported by countercyclical government measures.
  • Overweight education which is a sector supported by the government.
  • Reducing financials after macro problems have propped up worldwide.
  • Underweight consumer stock in Brazil
  • No exposure to Petrobras or Vale


Positive momentum taking place in the country.

  • Small allocations to financials