ECH has perked up in a big way this month, surging 11.4% as emerging markets ETFs have rallied thanks to a no tapering assist from the Fed. That performance makes ECH the second-best single-country Latin America ETF this month behind the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ). Importantly, ECH has soared even as copper prices have not. The iPath DJ-UBS Copper TR Sub-Index ETN (NYSEArca: JJC) is off almost 2% since the start of September.
While economic growth is slowing in Chile, interest rate cuts may not be necessary following stellar July retail sales numbers. Traders widely expect the Chilean central bank to leave interest rates at 5%, the second-highest among Latin America’s major economies behind Brazil, according to Bloomberg.
“Domestically, recent output and demand figures continue along the lines of previous months: moderate growth in output and strong private consumption. Headline inflation is still within the tolerance range, while core measures continue to hover around 1% annually. Inflation expectations have remained near the target in the policy horizon,” said Chile’s central bank in a recent economic assessment.
An unemployment rate of 5.7%, one of the lowest in the region, could be another positive catalyst for increased domestic consumption in Chile. In turn, that should be a positive for ECH, which allocates over 24% of its weight to consumer-oriented stocks.
iShares MSCI Chile Capped ETF
ETF Trends editorial team contributed to this post.