JP Morgan survey indicates investor confidence in Latin American IPOs
Seventy per cent of institutional investors in North America and Europe recommend that a Latin American company pursue an initial public offering in today’s capital markets, according to a survey released by JP Morgan’s depositary receipts (DR) business.
Survey participants, who were interviewed in September 2012, believe that despite significant macroeconomic headwinds in Europe and China, Latin America is a region with steadfast domestic markets and attractively-valued companies that demonstrate significant growth potential.
“Each year we survey North American and European institutional investors, with the aim of helping our Latin American clients better understand investor sentiment toward companies in the region,” says Candice Teruszkin, Latin America regional DR head of JP Morgan. “The findings from this year’s survey may help Latin American issuers identify ways to improve their market valuations over time and to better compete for and attract capital needed to fund their growth.”
The survey gathered the opinions of 40 institutional investors based in North America and Europe. These investors held, as of 30 June, a combined USD43bn, or 16 per cent, of actively managed equity in Latin American companies.
The majority of the study’s participants believe that the consumer goods (65 per cent) and consumer services (60 per cent) sectors offer the most attractive investment opportunities, given Latin America’s growing middle class, rising income levels and low domestic unemployment.
Government intervention and trading liquidity are the two greatest challenges Latin American companies face with respect to maintaining a fair market valuation, according to 38 per cent and 28 per cent of survey participants, respectively.
A majority of the study’s respondents (55 per cent) believe that an ADR programme can help a Latin American issuer maintain a fair market valuation, citing the benefits of improved trading liquidity and free float as well as increased exposure to a greater number of potential new investors.
More than one-third of the investors surveyed (35 per cent) recommend that Latin American companies that do not adhere to international reporting standards do so, as a means to maintain fair market valuation.
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