Report by Aurelion Research

Aurelion sees LatAm equities as increasingly well positioned to benefit from a broader rotation out of US equities and Big Tech, as commodity tailwinds, improving political clarity (in select markets) and depressed valuations begin to align. Their highest-conviction markets are Colombia and Argentina, with Peru also supported by strong fundamentals, while Brazil requires greater selectivity, and Mexico and Chile offer less attractive near-term risk-reward. Aurelion has built a diversified equity basket focused on companies they believe offer the most compelling combination of quality, upside potential and exposure to the LatAm growth story. The 30 stocks all trade on US exchanges to ensure accessibility and liquidity for investors, tilted towards banks, utilities, transportation and telecoms, with holdings including Itau Unibanco, Pampa Energia, Credicorp, FEMSA and ASUR.

Report by Your Weekend Reading

Why do China, shipping, iron ore, hardware, Brazil… all stand out if you screen high ROE’s with low valuation? Erik@YWR sees it as scepticism about global growth on which he is taking a contrarian view. Following this month’s review of YWR’s QARV rankings key themes include: 1) A massive China bull market has only just begun. 2) Opportunities in iron ore, where Fortescue, Rio Tinto and Kumba are delivering ~20% ROEs at <12x P/E despite China’s property crash. 3) The Taiwanese semiconductor supply chain stands out as highly profitable and undervalued. Everyone focuses on Nvidia and the datacentre buildout but misses the whole Taiwanese supply chain behind this. Tokyo Electron and ASML also screen well. 4) Brazil is overlooked, with names like Itau, Vale, Ambev and B3 all screening well. 5) Container shipping - supply-chain diversification could sustain tighter freight rates than investors expect.

Financials

Report by Galliano's Financials Research

Victor Galliano believes that the NAV is underestimated - separate from Itausa’s stake in XP, Itau Unibanco, which is Itausa’s core holding with a 37.2% stake, has a direct 9.96% XP stake. Adding its indirect XP stake share to Itausa’s NAV implies a sizeable discount of 27%. Since December 2008, only on 11% of the month end datapoints has Itausa’s discount exceeded 25%. This historically big NAV discount presents a buying opportunity.

Financials

Report by Creative Portfolios

Paul Hollingworth reveals that of the large EM banks, Itau Unibanco and Santander Brasil are producing a prodigious quantity of NNNPLs relative to their Equity. Of the large global systemic banks, Banco Santander stands out as a vulnerable entity (trouble stems mainly from LATAM). Broadly, it appears that banks in India, Peru, Colombia, South Africa and Brazil are generating a swelling quantity of NNNPLs. Conversely, Greece is reducing NNNPLs at a phenomenal rate.