Latin American funds are offering good prospects for investors with the markets attracting mainly US liquidity, having recovered from fall-out of the 1994 Mexican peso devaluation and subsequent crisis.

Peter Fuller, research associate director at Fund Research in London, believes that the amount of liquidity in the markets now makes any similar crisis unlikely.

Talking to fund managers, everyone seems to be bullish." he says.. "Latin America is attractive, relative to Asian emerging markets be-cause of the valuations in Brazil, Mexico and Argentina where the price earnings ratio is basically 11 to 15 times. In the Far East it is basically 20 to 25. " The inflation outlook is also positive.

Another factor driving the market is the improving liquidity situation which Fuller explains, is primarily down to the privatisation schemes.

The pattern of investment by funds is getting much more stock selective. "Even 18 months ago Latin America was basically an asset allocation exercise. You are still biasing the portfolios towards Mexico, Brazil and Argentina, but stock selection is getting more important."

This is the case even in Brazil, where the prime investment decision is between government or non-governmental exposure.

Until recently, most invested mon-ey was concentrated in the largest companies, but this pattern may be changing. "There are a lot of second line stocks coming through of reasonable quality," says Fuller. "so managers tend to more selective than they were 18 months ago." John Lappin"