Looking For Value In Consumer Staples


The relative outperformance of consumer staples stocks in Latin America in relation to consumer discretionary stocks seen over the past four years appears to have run its course and is reaching an inflection point. However, we do not believe that a peak in consumer staples outperformance implies the beginning of a bull-run in discretionary stocks across the region . Instead, we attribute the recent trend reversal to a weakening outlook for consumer staples stocks in Latin America, having been on steep uptrend since the height of the global financial crisis in early 2009.

The multi-year bull-run in the MSCI Latin America Consumer Staples index came to an end earlier in the year, after a break through long-term trendline support near the 650 level. The index has since struggled to break back above support-turn-resistance with a move down to the next line of support at 570 now looking distinctly possible in the near-to-medium term.

The technical picture for the MSCI Latin America Consumer Discretionary index is somewhat less clear, although the broader downtrend in place since 2010 remains unbroken, suggesting that further downside could lie ahead. Having failed to re-test trendline resistance around the 475-500 area, we see room for the index to fall back to long-term support and trade within the 400-470 range .

Reaching An Inflection Point
Ratio Of MSCI Latin America Consumer Discretionary Over MSCI Latin America Consumer Staples Index

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This article is tagged to:
Sector: Country Risk
Geography: Latin America, Brazil, Chile, Colombia, Mexico, Latin America