J.P. Morgan Adjusts Ratings: Downgrades Mexican Stocks, Upgrades Brazilian Equities

J.P. Morgan downgraded Mexican stocks to “neutral” due to economic slowdown and U.S. tariffs, while upgrading Brazilian equities to “overweight” due to potential conclusion of interest rate hikes and positive Chinese stimulus measures. The contrasting outlook reflects differing market conditions in Mexico and Brazil.

J.P. Morgan has revised its ratings on Mexican and Brazilian equities, downgrading the former while upgrading the latter. The downgrade for Mexican stocks is attributed to slower economic growth and the implications of U.S. tariffs. In contrast, the improved rating for Brazilian equities reflects an optimistic outlook regarding the end of the interest rate hiking cycle and the positive impact of stimulus measures from China.

The downgrade of Mexican stocks from “overweight” to “neutral” stems from concerns regarding a substantial slowdown in growth. JPMorgan highlighted that the Mexican economy may experience stagnation in GDP growth, especially during the first half of this year. Recent data indicated that Mexico’s economy contracted in the fourth quarter for the first time in over three years, with a lackluster growth forecast for the current year amid ongoing trade tensions.

Notably, U.S. President Donald Trump’s imposition of a new 25% tariff on imports from Mexico took effect recently. However, shortly after, several imports from Mexico and some from Canada were exempted from these tariffs for a month, highlighting the unpredictable nature of current trade policies.

In contrast, J.P. Morgan’s positive outlook for Brazilian equities led to an upgrade from “neutral” to “overweight.” Analysts at JPM believe that Brazil may be nearing the conclusion of its interest rate hikes, a development they see as a significant trigger for equity performance. Additionally, indications of further stimulus measures from China could bolster Brazilian stock performance.

Brazil’s central bank is anticipated to implement a third consecutive 100-basis-point increase in its Selic rate, aiming for a peak of 14.25%. However, JPMorgan suggested that a pause could follow in the upcoming March meeting. Moreover, the ongoing U.S. trade war with China is projected to benefit Brazil, enhancing its position as the leading exporter of agricultural products such as soy, cotton, and meats, which are expected to increase shipments to China as businesses seek tariff-free options.

In summary, J.P. Morgan’s recent adjustments in ratings for Mexican and Brazilian equities reflect contrasting economic conditions and growth forecasts. While Mexican stocks are facing a downgrade due to expected economic stagnation and trade uncertainties, Brazilian equities are projected to perform better as the nation approaches the end of interest rate hikes and benefits from favorable trade conditions with China. Such developments warrant attention from investors regarding potential opportunities and risks in these two markets.

Original Source: www.tradingview.com