JP Morgan Brazil investment trust sees positive returns in Brazil

With Brazil's economy growing by 2.7% last year, significantly more than the UK's 0.8% growth, and with the country's economy overtaking the UK's (£1.56 billion compared to £1.53 billion) J.P. Morgan Asset Management outlines its thoughts on the investment potential for the region.

JPMorgan Brazil Investment Trust portfolio manager Sebastian Luparia, said: "Markets have rebounded strongly since the October 2011 lows. However, the business cycle has bottomed in emerging markets, valuations remain attractive, and there is a strong tailwind of liquidity being provided by central banks, particularly the European Central Bank. Brazil is participating in this broad Emerging Market rally off cheap valuations.

"We believe Brazil is in a sweet spot as growth is set to accelerate over the rest of the year and valuations look attractive. The combination of easy monetary policy and tight fiscal policy should prove a good environment for equities in Brazil."

Luparia continued: "Brazil has been a very exciting investment opportunity since it achieved investment grade in April 2008 having transformed from inflationary boom-bust cycles. 2009 stress tested this when the country experienced a normal recession with a swift recovery. The investment opportunities we are finding in the region are focused on the domestic growth of the economy and we are selecting opportunities with a two to three year investment horizon so as to capitalise on investing in this growth.

“Our six sector analysts forecast long-term earnings per share and dividend growth for the universe of stocks based on meetings with Brazilian companies. We combine these forecasts with opinions on how valuations and the currency will impact returns to derive a five-year expected return for each company. These return expectations are what drive our buy and sell decisions.”