JPMorgan Says Mexico Index May Beat Brazil in Rebound

By Alexis Xydias

Aug. 21 (Bloomberg) -- Investors in Latin American equities should buy Mexican shares now and expect further declines in Brazil, if history is any guide, JPMorgan Chase & Co. said.

The MSCI Latin America Index has fallen more than 10 percent over two months in eight occasions since 1994, including the current 23 percent slide that started in May, Ben Laidler and a team of strategists at the U.S. brokerage wrote in a report dated yesterday. The sell-offs lasted an average of 15 weeks and dragged the benchmark down by 23 percent from this year's high.

Brazil's Bovespa Index has fallen 24 percent from its 2008 high, in U.S. dollars, on May 30. Investors who ``bought'' the index after an 11-week drop lost 10 percent in the following six months on average, JPMorgan said. The average six-month return after the Brazilian benchmark reached a trough is 24 percent.

Mexico's Bolsa Index, which also touched this year's high on May 30 when measured in dollars, may fare better in the short term, according to the strategists. Historically, an investment in the index returned at least 1 percent in the six months after an 11-week decline, and yielded 23 percent in the six months following a bottom, they said. The measure has fallen 14 percent since May 30.

Investing in the MSCI Latin America after an 11-week drop resulted in losses of 6 percent on average during the past sell- offs, while the six-month average return after troughs was 16 percent, JPMorgan calculated.

The brokerage reiterated its ``overweight'' position in Mexican shares and a ``neutral'' stance for Brazil.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.