Bet on Latin America as the No. 1 beneficiary of the new energy world order, says Bank of America

Published Thu, Apr 14 202211:13 AM EDT

Latin American stocks could see a boom going forward, as the region is a "primary beneficiary of the New Energy World Order" created by the Ukraine-Russia war, according to Bank of America. Russia is a major exporter of energy-related commodities, as well as a slew of other goods. But, as the country's war against Ukraine continues, Bank of America expects "Russian commodity flows to be rerouted away from Europe and the US." This, in turn leaves Latin America "well-position to fill this void," as countries in the region produce and export similar commodities to Russia, strategist Jared Woodard said. Prices on commodities ranging from oil to wheat have skyrocketed since the war began in late February, as investors worry the conflict could lead to global food and energy shortages. West Texas Intermediate, the U.S. oil benchmark, is up more than 36% year to date, trading at more than $100 per barrel. "We are structurally bullish commodity and material producers," he added. "As such, we think LatAm equities have the most favorable composition for investors looking to add or increase foreign exposure." Bank of America's comments come as investors appear to be mounting bets on a comeback for Latin American stocks. Markets in the region have underperformed the rest of the world in the last two years as some countries struggled to with massive Covid-19 case surges and political uncertainty. However, this underperformance has led to historically low valuations relative to the rest of the world . How to play it The firm also highlighted some exchange-traded funds investors can use to capitalize on this commodities regime change. For investors looking for broad exposure to Latin American markets, Bank of America recommended the iShares Latin America 40 ETF (ILF) . The fund, which has an expense ratio of 0.48%, has been on fire this year — rallying more than 27%. The bank also likes the iShares MSCI Brazil ETF (EWZ) , which is up 35% in 2022. The EWZ has an expense ratio of 0.57%. For investors looking to invest in Mexican stocks, the firm highlighted the iShares MSCI Mexico ETF (EWW) . The fund is up more than 5% in 2022 and has a relatively low expense ratio at 0.5%, but Bank of America did warn that its valuation is "relatively high" at the moment. —CNBC's Michael Bloom contributed to this report.

People pass in front of tanks of Brazil's state-run Petrobras oil company in Brasilia, July 25, 2019.

Ueslei Marcelino | Reuters

Latin American stocks could see a boom going forward, as the region is a "primary beneficiary of the New Energy World Order" created by the Ukraine-Russia war, according to Bank of America.

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