According to a survey released today by J.P. Morgan’s Depositary Receipts (DR) business, 70 percent of institutional investors in North America and Europe who responded to the survey recommend that a Latin American company pursue an initial public offering in today’s capital markets. 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,” said Candice Teruszkin, Latin America Regional DR Head of J.P. 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 June 30 2012, a combined (approximately) $43 billion, or 16 percent, of actively managed equity in Latin American companies 1.
Other notable findings from the survey include:
- The majority of the study’s participants believe that the Consumer Goods (65%) and Consumer Services (60%) 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% and 28% of survey participants, respectively.
- A majority of the study’s respondents (55%) believe that an ADR program 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%) recommend that Latin American companies that do not adhere to international reporting standards do so, as a means to maintain fair market valuation.