Landers: Mexico to provide a surprise

The manager of the £266.1m BlackRock Latin American investment trust said that while he remained underweight the Mexican stockmarket he was hunting for stocks that could benefit from potential reforms.

“Mexico, though underweight, could provide a positive surprise this year with a presidential election over the summer bringing the potential for much awaited reforms on the fiscal and energy policy fronts,” he said.

“We continue to look for stocks that may benefit from these reforms in Mexico.”

However, he warned that Mexico did not have the volume of companies listing on stockmarkets that has been seen in Brazil. He said that with the expected reforms, the number of companies coming to market could increase.

Meanwhile, at the end of last year the manager reduced his exposure to materials, particularly steel and mining.

“We decided to get out as the holdings were not worth the risk,” he said. “Currencies were appreciating and the companies were still not very competitive and our holdings were not working out as expected.

“So we sold and broke even on our investment.”

With the proceeds from the sale in materials the manager bought local Brazilian and Mexican bonds, which now account for just short of 6 per cent of the portfolio.

The manager said he was also maintaining his large overweight position in Brazil while being underweight almost all other markets.

“Brazil’s underperformance during 2011 was not enough to cause us to lose faith in our overweight position,” he said. “We remain positive on Brazilian equities for 2012 based on strong fundamentals, attractive valuations and a robust domestic economy driven by the continued growth in its middle class.”

On February 10 the trust’s ordinary shares were trading at a price of 608p, representing a 7.1 per cent discount to the net asset value of its investment portfolio.