Commodities lifted regional stock exchanges in 2010

Investors in Latin American stocks had plenty of reasons to cheer 2010 as most stock exchanges closed out the year with stellar performances, thanks to the steady rise of commodity prices and renewed confidence in emerging markets.
The Lima stock index, the IGBVL, was the region’s best performer, surging to a 64 percent gain after a lackluster performance in the first half and allowing investors to nearly recoup losses in 2008 and 2009. Following were Chile’s IPSA with a 47 percent gain; the Argentine Merval, up 40 percent; and Colombia, which posted a 35 percent gain. Mexico’s Bolsa de Valores rose 23 percent.
Meanwhile, the S&P 500 in the United States, considered the most representative equities benchmark for the U.S. economy, ended the year up 15 percent. London’s FTSE gained a mere 9 percent.
“The reason why Latin American stocks did so much better than U.S. stocks can be explained in one word—commodities,” said Emery Ventura, director at Economática, a financial-services firm based in New York.
With world prices soaring, sales of gold in Peru, copper in Chile and cereals in Argentina boosted the economies, and the stock markets, of those countries in particular, Ventura said.
Economists are not forecasting a drop in China’s seemingly insatiable demand for raw materials over the short term.
“If commodities continue doing well, the region’s countries will do well,” Ventura said.
But stock markets in many emerging markets are more highly concentrated than in more industrialized countries and can be more volatile. In Peru, mining firms represent 46 percent of the market capitalization on the Lima exchange. The 10 largest companies on the São Paulo exchange make up more than 56 percent of its value.
Brazil bucked the regional trends in 2010. The São Paulo index, the Bovespa, inched up 2.3 percent in 2010 after surging 155 percent the year before.
Venezuela was the only Latin American country whose stock exchange ended lower for the year. In dollar terms, the Caracas IBC index fell more than 40 percent.  But in local currency, the Venezuelan stock exchange was up 14 percent.
Change for the region could be coming in 2011, with Chile, Peru and Colombia moving to integrate their stock exchanges as long as the booming Peruvian market gains congressional approval.

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