FUNDVIEW-Latin America funds up for 2009, but concerns loom

* Latin America region takes top spot for 2009 returns

* U.S. economy, regulation pose concerns for future

By Erin Kutz

BOSTON, July 14 (Reuters) - Latin American funds have seen
soaring returns as investors regained confidence in riskier
markets, but a slower-than-expected U.S. economic recovery has
cast doubt on the region's potential for a full rebound.

The 30 Latin American mutual funds tracked by Thomson
Reuters firm Lipper Inc have gained 35.9 percent in the year to
July 9, more than any other world equity fund category.

Anticipated green shoots in the economy early this year
pushed investors back into edgier markets like Latin America,
after leaning toward more defensive holdings such as U.S.
Treasury securities, money markets or even cash.

"It put a little greed back into the market," said Lipper
research manager Jeff Tjornehoj. "People said, 'I have
something to be excited about and it's not Uncle Sam.'"

But recent economic data shows expectations of a swift U.S.
economic rebound may have come prematurely, which could pare
the sharp gains Latin American funds have seen, Tjornehoj said.
In June, U.S. consumer confidence fell and U.S. employers cut
about 100,000 more jobs than Wall Street economists predicted,
suggesting slowed momentum in a bounce back from recession.

Latin America's concentration of energy and materials
companies leave it vulnerable to fluctuations in commodity
prices. The fund category is still down almost 42 percent for
the one-year period, according to Lipper.

But Adam Kutas, manager of the $3.2 billion Fidelity Latin
America Fund FLATX.O, finds promise in the region's wealth of
natural resources. His fund is up more than 34 percent this
year.

"Longer term, I'd see the fact that Latin America is rich
with natural resources as a positive," said Kutas, who manages
the fund out of London for Boston-based mutual fund giant
Fidelity Investments.

Countries still in the industrialization process, such as
China and India, will rely on resources from Latin America for
their development and provide continual support to the markets,
he projected.

One of Kutas' top 10 holdings as of March 31 is Petrobras
(PETR4.SA), a state-controlled Brazil energy company involved
in an offshore expansion.

Jose Costa Buck, manager of T. Rowe Price's $2 billion
Latin America Fund, which also has a stake in Petrobras, sees
potential for a long-term product in the company's offshore
drilling initiative.

The company's share price is up about 33 percent this year
and is trading at almost 13 times projected 12-month earnings,
slightly below its sector average of about 15, according to
Reuters Estimates.

As of March 31, 19.5 percent of the T. Rowe Price Latin
America Fund was invested in Petrobras.

REGULATORY CONCERNS

But proposals for increased regulatory powers of the
Commodities Futures Trading Commission could pose a threat to
the region, analysts say.

Last week the U.S. government announced plans to increase
oversight in commodity markets by allowing the agency to curb
speculative trading of energy and commodities.

If carried out, the proposals "can only have a dampening
effect" on commodity prices and the strength of Latin American
markets, said Tjornehoj.

In the early part of the decade, Latin American funds saw
gains just as steep as their 2008 losses, which were about 60
percent, according to Chicago research firm Morningstar Inc.
Total returns for the category were about 60 percent in 2003
and stayed around 40 percent and up per year through 2007.

Buck doubts returns in the region will reach the levels
they did early this decade, but said he expects the Latin
American region to be a "winner" for the long term, as
economies there expand to include sectors beyond energy and
natural resources. He pointed to his fund's holdings in
banking, retail, software and homebuilding companies.

"There are other domestic names that should support the
markets," Buck said, noting the diversification of sectors will
offset potentially negative effects in commodities regulation.

The slowed pace of returns in Latin American markets
indicates the increasingly developed nature of the economies
there, said Tjornehoj.

"Ten years ago, it seemed like such a backward place to
invest, any gains seemed significant," he said. "They're not
being treated like outcasts anymore. Now the expectations are
for a more mature economy."
(Reporting by Erin Kutz. Editing by Jason Szep and Matthew
Lewis)