A Closer Look at Sectors in Latin America

The drivers of Latin America’s economies have significantly changed over the past two decades, as we can see clearly by looking at the sector composition of the Latin American stock market. Materials, financials and consumer staples, the three top-performing sectors in the region since December 1998, have grown in prominence over the last 20 years, largely at the expense of the communication-services sector.

Compared to the other regions within the emerging markets (EM), Latin America’s economies had greater representation in materials, consumer staples and industrials, and less in the information technology (IT), consumer discretionary and real estate sectors. In the overall MSCI EM Index, the largest sectors were IT (driven by EM Asian companies), financials (driven by EM EMEA companies) and consumer discretionary (driven by EM Asian companies), exhibiting a procyclical profile.

Relative to other EM regions, the sector profile of EM Latin America is distinctive, which may present opportunities for diversification.