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Monthly Andean Strategy Update: Compelling valuations in Chile; cutting upside in Colombia - Credicorp Capital

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February 7, 2014 ( newswire) The Andean region, returned 11% in January (MILA 40 Index), thus outperforming the Latam region, as the region has been no exception to the global outflow from emerging markets.

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In Chile, we believe the market has over-sold and offers compelling medium-term valuations (P/E 2014E at 14.0x). Lack of domestic support has allowed prices to downwardly adjust the most in the region, resulting in an attractive entry point as ongoing levels largely overplay ongoing regulatory uncertainties, in our view. Despite a decelerating economy, we continue to see strength in domestic consumption. We continue to support companies exposed to the domestic cycle, with high earnings visibility. Our top picks in Chile are: Colbun, Falabella, Enersis, and Santander.

We are cutting our expected market upside in Colombia as we see a deterioration in the Oil & Gas industry, due to a slightly weaker-than-previously anticipated price environment, reduced production guidance, and higher capex needs, primarily at Ecopetrol. Our strategy in Colombia favors growth visibility, cheap valuations and--to the extent that it is possible--liquidity. Our top picks are: PFAval and PFDavivienda.

In Peru, we see value in many mining plays, but remain cautious while we monitor progress on cost cutting programs in most of the companies we cover. Meanwhile, we continue to favor defensive, domestically exposed stocks, which should benefit from a dynamic domestic demand and from an additional boost coming from expected infrastructure programs. Pacasmayo and Graña y Montero remain our favorite names in the country. Among the miners, we favor Volcan.

For charts, tables and the full report, see the attached file.

Credicorp Capital

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