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LATAM: JP Morgan Upgrades Brazil Equities To OW, Mexico Downgraded To Neutral

LATAM
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  • JP Morgan has upgraded its recommendation on Brazilian equities to OW, while downgrading Mexico to Neutral, from OW, as the factors that led them to upgrade Mexico are now behind and new ones are at play, which could help Brazil.
  • JPM says that both have relatively attractive valuations and poor positioning. However, the global scenario now benefits Brazil, as long as the US doesn’t move to a recession.
  • They also believe that Brazil might be closer than was expected to the end of its hiking cycle, which will be a very important trigger for equities. In addition, the uplift in China should benefit Chinese proxies like Brazil, while the 2026 elections also bring an element of attractiveness.
  • In Mexico, by contrast, JPM is concerned about the very steep growth slowdown, which they believe is likely to bring H1 GDP to a halt. Also, Mexico is more exposed to tariffs, while local investors remain cautious, which means it could take longer for them to add.
  • JPM emphasises that this change is tactical and not structural, given ongoing fiscal concerns in Brazil.
  • They remain somewhat defensive in both countries, but prefer to get more exposed to bond proxies in Brazil than exporters, and also like incumbent banks and utilities. In Mexico, they still prefer staples (especially bottlers), real estate and financials.
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  • JP Morgan has upgraded its recommendation on Brazilian equities to OW, while downgrading Mexico to Neutral, from OW, as the factors that led them to upgrade Mexico are now behind and new ones are at play, which could help Brazil.
  • JPM says that both have relatively attractive valuations and poor positioning. However, the global scenario now benefits Brazil, as long as the US doesn’t move to a recession.
  • They also believe that Brazil might be closer than was expected to the end of its hiking cycle, which will be a very important trigger for equities. In addition, the uplift in China should benefit Chinese proxies like Brazil, while the 2026 elections also bring an element of attractiveness.
  • In Mexico, by contrast, JPM is concerned about the very steep growth slowdown, which they believe is likely to bring H1 GDP to a halt. Also, Mexico is more exposed to tariffs, while local investors remain cautious, which means it could take longer for them to add.
  • JPM emphasises that this change is tactical and not structural, given ongoing fiscal concerns in Brazil.
  • They remain somewhat defensive in both countries, but prefer to get more exposed to bond proxies in Brazil than exporters, and also like incumbent banks and utilities. In Mexico, they still prefer staples (especially bottlers), real estate and financials.