An ETF indexed to Chile, the world’s largest copper producer, has climbed 9% the past three months on a rebound in the commodity’s price and a resurgence in China’s economy.
The performance of the iShares MSCI Chile Index (NYSEArca: ECH) is tied to copper, and Chile is a top supplier of the metal to China.
“ECH’s underperformance (last year) may have been due to concerns about declining demand from China, which saw its economy slow. Chile sells a lot of copper to China. This week Beijing reported that GDP grew at a greater-than-expected 7.9%,” Roger Nusbaum wrote for The Street. [Chile ETF for a Diversified Commodity Play]
Another important facet of Chile is that it is the only emerging market country that has privatized social security, Nusbaum reports. A portion of all working employees paychecks goes into equity and fixed-income investments, creating a constant demand for Chilean equities.
ECH gained about 8% last year, compared to 15% for the broad based iShares MSCI Emerging Market Index Fund (NYSEArca: EEM).
The rise in copper prices is expected to be profitable for one of the largest copper exporters in the world, reports Bret Jensen at Seeking Alpha. The trade surplus in widening in Chile and GDP growth is expected to post between 4.25% and 5.25% this year. [Chile, Peru Stand Out in Emerging Market ETFs]