LatAm: Energy-led rotation and AI shift – BNY
BNY’s Bob Savage highlights that South American equities are being driven by commodity inflows, with energy holdings sharply above historical averages as investors use the region as a hedge against war-related supply shocks. At the same time, structural themes such as AI infrastructure, fintech expansion and data centers in Brazil and Chile are expected to support banking, retail and education sectors over the coming years.
Energy spike contrasts with tech underweights
"LatAm’s energy holdings spike started in January with the surprise U.S. action in Venezuela; it continues with the war in Iran. If peace talks lead to a sustainable deal to reopen the Strait of Hormuz, the risk for the region is in the unwind of energy as a safe-haven equity. Unlike the U.S. markets, where IT has held up against war inflation shocks, the LatAm region has seen a pullback in IT holdings."
"The spike in energy is notable – 50% over the three-year average in the span of five months. In comparison, materials are just 25% over the three-year average, while IT is 15% below. Markets are treating LatAm equities as a commodity hedge against war-driven supply shortages, even as real rates weigh on broader growth."
"Regional dynamics rest on demographics: the population is growing 0.6% y/y, and the average age is 31. Savings rates are rising, and urbanization is accelerating the shift from agriculture toward manufacturing and services. Banking, retail and education remain key growth industries, and AI will play a critical role in their profitability and productivity."
"Chile and Brazil are driving the region’s data center expansion – from roughly 300 today to 400 by mid-2027. Beyond U.S. hyperscalers, the tech ecosystem pushing for this growth includes MercadoLibre, Globant, TOTVS, Nubank and Rappi. Cloud services are in demand, and fintech innovation is thriving across the region."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Deutsche Bank: The bursting of the AI bubble may become the biggest systemic risk in the market next year; U.S. Treasury bonds are expected to attract safe-haven funds.
George Saravelos, Global Head of FX Research at Deutsche Bank, stated that since the beginning of this year, global investors' pessimism toward the bond market has become excessive. He believes the market may be underestimating the likelihood of large-scale capital flows into the bond market if significant risks emerge in the artificial intelligence industry.
Risks Hidden Behind S&P 500 Record Highs: Most Constituent Stocks Underperform, Rising Oil Prices and U.S. Treasury Yields Intensify Market Divergence
Persistently high oil prices and borrowing costs are impacting the bond, credit, and small-cap stock markets, while the strong performance of large technology stocks is masking the increasingly evident divergence within the U.S. stock market.
Elon Musk continues one-sided Ambani beef, mocks him in viral X post
Nobel laureate warns: French debt crisis may be "too big to save," eurozone faces "explosive" crisis
France's debt has reached €3.6 trillion, accounting for 119% of its GDP—the highest level since the creation of the euro. Paul Krugman, the 2008 Nobel Prize winner in Economics, warned that France is on a path of "fiscal unsustainability" and may have gone from "too big to fail" to the dangerous position of being "too big to be rescued." Its eurozone membership could trigger an "explosive debt crisis" and deliver a destructive blow to European integration.
Crypto prices
More
