More Pain For US$-Based Investors

October 2008 | Market Strategy

Latin American assets continue to get battered by the flight to safety from US investors, and falling global commodity prices. We have taken a closer look at the impact of the ongoing spike in risk aversion on Latin currencies (see 'Latin FX: Searching For Relative Value' in yesterday's Daily Financial Alert) and expect to see considerable further downside for these currencies over the coming months. In particular, we believe that higher-yielding currencies, where carry trade positions continue to be unwound will continue to suffer. From an US investor's perspective, this amplifies the losses sustained in some Latin American equity markets, seen over the past few weeks. As such, we take a look at some key equity markets in the region in US dollar terms, to gauge the impact of the ongoing sell-off in Brazil, Chile and Peru on foreign investor sentiment.

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