INTERNATIONAL confidence in Latin America received a knock last year as the region was hit by shockwaves from the Asian economic crisis, and Edinburgh Inca Trust suffered accordingly.

The #29.9m investment trust lost 14% of its net asset value during the six months to March 31, as stock markets from Mexico City to Buenos Aires crashed.

But the crisis bottomed out in January, since when overseas investors have started to cautiously rebuild their investments in Latin America, whose economic fundamentals remain sound - despite problems in Mexico caused by low oil prices and the knock-on effect of low copper prices in Chile.

Despite its disappointing performance, Edinburgh Inca managed to stay ahead of its benchmark during the first half by concentrating on blue-chip companies in the region's four main markets - Argentina, Brazil, Chile and Mexico.

The trust shifted its assets away from the smaller and less liquid stock markets in Peru, Venezuela and Colombia and lightened its position in smaller companies following a change in its mandate in December 1997.

This change in tack enabled Edinburgh Inca to stay ahead of the IFC Latin American Investibles Index, which fell 16.6% in sterling terms during the six-month period.

The trust said a recovery in Latin American share prices would depend in the short term on a return of US mutual funds in the region.

But its investment decisions could well be determined more by conditions in the US market than by economic fundamentals south of the Rio Grande, it noted.