The Russia-Ukraine war “has created a massive void in critical materials,” says Bank of America.
This leaves room for commodity-rich regions like Latin America to boost prices and market share.
Bank of America identified nine buy-rated stocks with exposure to Latin American commodities.
Commodities — usually classified as an alternative asset class — have finally earned a rare opportunity to shine.
According to Wall Street experts, there are two major reasons to invest in commodities right now.
First, they’ve traditionally been a good hedge against inflation, which makes them excellent assets to diversify portfolios and protect against 40-year highs in consumer prices, said Hakan Kaya, senior portfolio manager at Neuberger Berman, in a recent podcast.
Second, sanctions on Russia stemming from its invasion of Ukraine have created a gap in commodity production that will need to be filled by companies in other previously overlooked nations, said Ajay Singh, an equity strategist from Bank of America.
“The ongoing invasion and the consequent sanctions from the West and its allies create a void in critical materials that will need to be compensated by the rest of the world,” wrote Kapur in a March 21 note. He specifically pointed to commodity-rich countries like Australia, Indonesia, Malaysia, Qatar, Saudi Arabia, South Africa — and particularly several in Latin America.
Latin America is a key commodity market
Among those nations, Kapur highlighted Latin America as a primary beneficiary of a tightening commodities market thanks to the similarity between its exports and those of Russia and Ukraine.
“LatAm, being a global supplier of agricultural products and hard commodities, is key within the new order of global trade, as supply from Russia is impacted by sanctions and supply chain disruptions,” he wrote.