Analysts say that Chilean stocks have a further upside, giving strength to the single-country exchange traded fund (ETF). Inflationary pressure has been the main issue that Latin American economies are grappling with this year, but Chile is ahead of the pack.
“It seems like the central bank (of Chile) is the most ahead of the curve, so therefore you are probably near the end of their rate hike cycle, as opposed to Brazil, which is just starting,” Adam Kutas, manager of Fidelity’s Latin America Fund, told Reuters.
Michale O’Boyle for Reuters explains that Brazil had at one time shadowed Chile’s success as an investor favorite. However, the latest data indicates that Chile’s stocks may be undervalued, due to the lack of broad, global ownership. [Chile ETF: How it Beat the Odds.]
Kutas advises that the companies in Chile which are cash rich are expanding into Peru, and are setting themselves up to be successful, and those companies which are tapping into capital markets to drive growth should be avoided.
The iShares MSCI Chile Index (NYSEArca: ECH) is in negative territory, year to date. The $909.4 million ETF weights heavily toward industrials and consumer staples, as well as materials. The fund may have also garnered assets after the last commodity rally, as the country is rich in copper. [Concern Over Japan’s Smelters Drags Down Copper ETFs.]
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.