Aberdeen Latin America Equity Fund, Inc. (LAQ) Exposure to an improving economic situation through a growing pool of well-managed companies

Transcription

1 Aberdeen Latin America Equity Fund, Inc. (LAQ) Exposure to an improving economic situation through a growing pool of well-managed companies April Andy Brown, Investment Manager, Global Emerging Market Equities Aberdeen Asset Management Aberdeen Asset Management is the marketing name in the US for the following affiliated, registered investment advisers: Aberdeen Asset Management Inc., Aberdeen Asset Management Investment Services Ltd., Aberdeen Asset Management Ltd and Aberdeen Asset Management Asia Ltd (collectively, the Aberdeen Advisers ). Each of the Aberdeen Advisers is wholly owned by Aberdeen Asset Management PLC. "Aberdeen" is a U.S. registered service mark of Aberdeen Asset Management PLC.

2 Your presenter Andy Brown, Investment Manager Global Emerging Market Equities 1

3 Agenda Latin America investment themes Investment objective Key fund facts Market review and results Fund positioning Outlook and conclusion 2

4 Latin American investment themes

5 Popular perception of Latin America a region plagued by weak political systems and economies - Weak politics region of populist politicians or military governments - Economies dependent on commodities and US interest rates - Inflation region suffered hyper-inflation many times - Poor company choice dominated by state companies or entrenched families But what is the reality? 4

6 So, what has changed? Development of more stable democratic process in many countries Improved economic fundamentals, supporting long-term growth prospects - Vast natural resources, world s leading supplier of commodities, leading to trade surpluses - More orthodox economic policies adopted - Inflation tamed, lower interest rates - Risk profile has changed - evidence external debt Growing, youthful populations with burgeoning workforces are enhancing earning and spending power, driving domestic growth and lessening dependence on developed world Pool of well-managed companies is growing, levels of corporate debt have been falling, profitability has improved, dividend payouts are increasing, ratings remain attractive Perception is no longer the reality 5

7 Structural shift to lower inflation Inflation Brazil Mexico Colombia Peru Inflation targets have been introduced over past decade Source: Bloomberg. December For illustrative purposes only. Inflation tamed, allowing interest rates to remain lower through cycle 6 Jun 95 Dec 95 Jun 96 Dec 96 Jun 97 Dec 97 Jun 98 Dec 98 Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 Jun 02 Dec 02 Jun 03 Dec 03 Jun 04 Dec 04 Jun 05 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10

8 Favorable demographics Current population Current Population (%) Country Current Population (m) Under 15 yrs yrs. Over 65 yrs. Brazil Chile Colombia Mexico United States United Kingdom Eurozone Source: Bloomberg, 02 February For illustrative purposes only Currently, over 20% of Japan's population and over 15% of American, UK and Eurozone citizens are over age of 65 - Current demographic consensus implies these figures will increase over time, limiting economic growth In contrast, proportion of Latin American population of retirement age in single-digits - Growing, youthful populations with burgeoning workforces are enhancing earning and spending power, driving domestic growth and lessening dependence on developed world Driving domestic consumption, fuelling economic growth 7

9 Economic growth driven by Average Expected GDP Growth, 2010E 2020E (%) Argentina Mexico Colombia Chile Brazil Peru Latin America Commodities will continue to be a fundamental pillar but domestic dynamics will play a key role going forward Source: Santander estimates, 26 November 2010 Projections are offered as opinion and are not reflective of potential performance. Projections are not guaranteed and actual events or results may differ materially For illustrative purposes only 8

10 employment growth Employment Growth (2010E, 2011E) (%) E 2011E Argentina Brazil Chile Colombia Mexico Peru -0.8 Sources: Argentina: Ministry of Economics and Central Bank, Brazil: IBGE, Secex, FIPE, FGV and Central Bank, Chile: National Institute for Statistics and Central Bank, Colombia: National Institute for Statistics and Central Bank, Mexico: Ministry of Finance, Banco de Mexico, Peru: LatinSource, Bloomberg and Santander estimates, as at 26 November Projections are offered as opinion and are not reflective of potential performance. Projections are not guaranteed and actual events or results may differ materially For illustrative purposes only 9

11 consumer loan growth Consumer Loan Growth (2010E, 2011E) (%) E 2011E Argentina Brazil Chile Colombia Mexico Peru Sources: Argentina: Ministry of Economics and Central Bank, Brazil: IBGE, Secex, FIPE, FGV and Central Bank, Chile: National Institute for Statistics and Central Bank, Colombia: National Institute for Statistics and Central Bank, Mexico: Ministry of Finance, Banco de Mexico, Peru: LatinSource, Bloomberg and Santander estimates, as at 26 November Projections are offered as opinion and are not reflective of potential performance. Projections are not guaranteed and actual events or results may differ materially For illustrative purposes only 10

12 consumer credit penetration Consumer and Mortgage Credit Penetration (2010) (% of GDP) Mexico Colombia Peru Brazil Chile USA UK Sources: UBS Investment Research, December 2010 For illustrative purposes only. 11

13 Not just the economy LatAm: return on equity LatAm: net debt to equity 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Marked improvement in focus and profitability of companies in recent years Less debt and stronger balance sheets Companies recognise that to compete globally they need to adopt global best practices the companies have got better too Source: Morgan Stanley, Factset, 2010 For illustrative purposes only 12

14 Importance of transparency rise of Novo Mercado Comparative returns 1,000 Brazil IBrX index Brazil Corp Gov index Jan Aug Mar Oct May Dec Jul Sep Apr Nov Jun Aug Mar Oct 10 Started in 2000, first company listed 2002 since then, 113 companies have listed Requires one share class, independent directors, IFRS or U.S. GAAP accounts, etc Outperformance of Corporate Governance index = positive reinforcement Source: Bloomberg, BM&F Bovespa as at 28 Jan 2011 For illustrative purposes only 13

15 The market is broadening Total IPO number of registrations* in Brazil IPOs on an increasing trend despite a fall back in Companies that issued IPOs in 2007 have now built a track record In first month of 2011 six IPOs have been filed Source: CVM Jan 2011 * CVM double counts an offer when it has a primary and a secondary component. Jan 2011 For illustrative purposes only 14

16 Market review MSCI Emerging Markets & MSCI Developed World (USD) MSCI Emerging Markets MSCI World % Growth (rebased to 100 as at 31/12/09) Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Latin American equities continued a rally into the end of 2010, on hopes of an improving US economy, low interest rates and better commodity prices, with the MSCI EM Latin America rising by 14.9% in the year Since then the market has fallen on geopolitical concerns along with worries over inflation and fuel prices Source: Bloomberg, MSCI, end December For illustrative purposes only 15

17 Summary and outlook

18 Summary and outlook We believe Latin American equities offer exposure to the region s improving economic situation, favorable demographics, large pool of consumers, and rising domestic consumption We feel corporate governance has improved vastly in recent years, and the region now has a pool of well-managed, conservative, shareholder-friendly companies with the potential for long-term share price and dividend growth Aberdeen benefits from an experienced, cohesive team and a robust, transparent investment process In the short term we feel, economies are growing well, but inflation is also on the rise We believe rotation from emerging markets into developed markets may see Latam underperform in 1H, but this may prove short lived, as the developed world s economic recovery is tenuous We will take advantage of any downward corrections to invest in good quality companies at more attractive valuations 17

19 Aberdeen s emerging market closed-end funds Single Country Aberdeen Chile Fund, Inc. (NYSE: CH) Aberdeen Israel Fund, Inc. (NYSE: ISL) Aberdeen Indonesia Fund, Inc. (NYSE: IF) Regional Aberdeen Asia-Pacific Income Fund, Inc. (NYSE: FAX) Aberdeen Latin America Equity Fund, Inc. (NYSE: IAF) Global Aberdeen Global Income Fund, Inc. (NYSE: FCO) Aberdeen Emerging Markets Telecommunications and Infrastructure Fund, Inc. (NYSE: ETF) Primarily managed from Singapore Primary managed from London and Sao Paulo Closed end funds have a one-time initial public offering and then are subsequently traded on the secondary market through one of the stock exchanges. The investment return and principal value will fluctuate so that an investor s shares may be worth more or less than the original cost. Shares of closed end funds may trade above (a premium) or below (a discount) the net asset value (NAV) of the fund s portfolio. There is no assurance that a fund will achieve its investment objective. Closed-end funds, unlike open-end funds are not continuously offered. There is a one-time public offering, and once issued, shares of closed-end funds frequently trade at a discount from the net asset value. The price of the Fund s shares is determined by a number of factors, several of which are beyond the control of the Fund. Therefore, the Fund cannot predict whether its shares will trade at, below or above net asset value. The information presented, was prepared and issued by the Fund based on publicly available information, internally developed data and other sources believed to be reliable. All reasonable care has been taken to ensure accuracy. International investing entails special risk considerations, including currency fluctuations, lower liquidity, economic and political risks, and differences in accounting methods; these risks are generally heightened for emerging market investments. There are also risks associated with investing in Latin America, including the risk of investing in a single-country fund. 18

20 Disclaimer Important: Past performance is not indicative of future results. Aberdeen Asset Management Inc. ("Aberdeen") does not warrant the accuracy, adequacy or completeness of the information and materials contained in this document and expressly disclaims liability for errors or omissions in such information and materials. Any research or analysis used in the preparation of this document has been procured by Aberdeen or its affiliates for their own use and may have been acted on for their own purpose. The results thus obtained are made available only coincidentally and the information is not guaranteed as to its accuracy. Some of the information in this document may contain projections or other forward looking statements regarding future events or future financial performance of countries, markets or companies. These statements are only predictions and actual events or results may differ materially. The reader must make his/her own assessment of the relevance, accuracy and adequacy of the information contained in this document and make such independent investigations, as he/she may consider necessary or appropriate for the purpose of such assessment. Closed end funds have a one-time initial public offering and then are subsequently traded on the secondary market through one of the stock exchanges. The investment return and principal value will fluctuate so that an investor s shares may be worth more or less than the original cost. Shares of closed end funds may trade above (a premium) or below (a discount) the net asset value (NAV) of the fund s portfolio. There is no assurance that a fund will achieve its investment objective. Any opinion or estimate contained in this document is made on a general basis and is not to be relied on by the reader as advice. Neither Aberdeen nor any of its agents have given any consideration to nor have they made any investigation of the investment objectives, financial situation or particular need of the reader, any specific person or group of persons. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the reader, any person or group of persons acting on any information, opinion or estimate contained in this document. The information herein including any expressions of opinion or forecast have been obtained from or is based upon sources believed by Aberdeen to be reliable but is not guaranteed as to accuracy or completeness. The information is given without obligation and on the understanding that any person who acts upon it or otherwise changes his position in reliance there on does so entirely at his or her own risk. Aberdeen reserves the right to make changes and corrections to its opinions expressed in this document at any time, without notice. Any unauthorized disclosure, use or dissemination, either whole or partial, of this document is prohibited and this document is not to be reproduced, copied, made available to others. Closed-end funds, unlike open-end funds are not continuously offered. There is a one-time public offering, and once issued, shares of closed-end funds frequently trade at a discount from the net asset value. The price of the Fund s shares is determined by a number of factors, several of which are beyond the control of the Fund. Therefore, the Fund cannot predict whether its shares will trade at, below or above net asset value. The information presented, was prepared and issued by the Fund based on publicly available information, internally developed data and other sources believed to be reliable. All reasonable care has been taken to ensure accuracy. International investing entails special risk considerations, including currency fluctuations, lower liquidity, economic and political risks, and differences in accounting methods; these risks are generally heightened for emerging market investments. There are also risks associated with investing in Latin America, including the risk of investing in a single-country fund.