Investments: according to BofA there is still little conviction with the region

About the liquidity of funds

A relevant piece of information from the traditional BofA survey is the liquidity level of Latam funds. In this regard, the study shows that cash levels increased to 5.7% this month compared to 5.5% in October, very close to historical levels. Similarly, the proportion of investors who are overweight cash also increased this month while risk taking and protection remain close to the historical averagecomment the analysts.

At the sector level, materials are cheaper than those in the United States, but no consensus on stimulus in China: Utilities and financials remain the most overweight sectors while materials are the most underweight sectors. Participants are divided on whether stimulus in China could push commodity prices higher. “Trump’s large-scale restructuring of global trade through tariffs could be bearish for base metals, and recent news pointed to insufficient stimulus in China.”

Below is the most relevant part of the report among 3,000 managers.

• What do you consider to be the biggest external risk for Latin American markets?: Rising US rates and a strong dollar are considered the biggest tail risk for the region.
• Percentage of investors planning to increase their equity allocation in the next 6 months: 34% plan to increase equity allocation, close to the historical average.
• What do you consider to be the greatest external risk for Latin American markets?: The increase in rates in the United States is considered the greatest extreme risk for the region.
• Which equity sectors are you most overweight?: Participants are most overweight in financials and utilities (similar to last month).
• In which equity sectors are you underweight?: Participants are more underweight in energy, communication, staples and materials than overweight.
• What strategies do you think could perform better in the next 6 months?: Participants continue to prefer high-quality strategies.
• What are your expectations for the dollar in 2025?: 60% of participants expect a stronger dollar in 2025.
• Do you think the stimulus in China will be enough to push commodity prices higher over the next six months? There is no consensus on whether stimulus in China will be enough to push commodity prices higher over the next six months.
• Where do you see the Brazilian real at the end of 2025?: 43% of participants expect the real to exceed 5.71 next year, compared to just 6% in October.
• Where do you see Ibovespa at the end of 2025?: 66% of participants affirm that Ibovespa will be greater than 130,000, compared to 45% last month.
• For domestic industries in Brazil, how do you see profit revisions in 2025?: Only 13% of participants expect downward revisions to revenues for domestic industries in Brazil next year.
• At what selective level do you expect individuals to return to investing in stocks?: A third of participants expect the rotation towards equities to occur when the Selic rate reaches 10%.
• Where do you see Brazil’s Selic rate at the end of this tightening cycle?: 67% expect the Selic rate to be 12.5% ​​or higher in 2025 (up from 29% last month).
• Where do you see Brazil’s Selic rate at the end of 2025?: 56% of respondents expect a Selic rate between 12% and 12.75% (up from 22% last month).
• What do you expect for Brazil’s real GDP growth in 2024?: Participants expect GDP growth of between 2% and 3% in 2024.
• What do you expect for Brazil’s real GDP growth in 2025?: Respondents expect Brazil’s real GDP growth to be between 1% and 2% in 2025.
• Do you think Brazil or Mexico could perform better in Latin America in the next 6 months?: Participants are more constructive regarding Brazil than Mexico.
• Where do you see Mexico’s real GDP growth in 2024?: Participants expect Mexico’s real GDP growth between 1% and 2% in 2024.
• Where do you see Mexico’s real GDP growth in 2025?: You expect Mexico’s real GDP growth to be between 0% and 1% in 2025.
• Where do you see the Banxico interbank rate at the end of 2024 (today 10.50%): Most participants expect Mexico’s rate to be between 9.50% and 10.25% at the end of 2024.
• Where do you see Banxico’s interbank rate at the end of 2025?: They expect rates of between 8.50% and 9.25% at the end of 2025.

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Participants are more overweight in financial and utility stocks.

• How do you expect the administration’s new policies in Mexico to impact asset prices in the short term?: Only 17% of participants have a more positive view on Mexican asset prices.
• Do you believe that the “nearshoring” narrative in Mexico is already incorporated into the prices?: Participants believe that “nearshoring” in Mexico is already included in the price.
• What do you consider to be the greatest tail risk for the Andean markets?: The majority of participants (4.3%) consider copper prices as the main tail risk for the Andean markets.
• Which countries in the Andean region do you think could perform better in Latin America in the next 6 months?: Among the Andeans, respondents prefer Chile.
• Net Percentage Says Overweight Cash: Net overweight cash positions increased to -4%, up from -16% last month.
• Percentage of investors with higher than normal risk in their portfolio: The proportion of investors with higher than normal risk is in line with the historical average.
• The net percentage say they have higher than normal risk in their portfolio: the net risk assumed was -17% in November 2024 compared to -9%.
• Percentage of investors who protected themselves against a sharp fall in stock markets in the next three months: 40% of investors are taking protection against a sharp fall in stock markets, a figure close to the historical average of the survey.
• Percentage rating liquidity conditions as good and US 10-year rates: 46% of investors surveyed rate liquidity conditions as good or very good.