“Annual headline inflation, currently at 4.6%, has remained above the 4% mark more a year and a half, even though it’s come down from its October 2014 peak of 5.7%, and various core measures have been edging higher in recent months,” reports Dimitra DeFotis for Barron’s.
Copper is always an issue for ECH and Chilean stocks, too. When looking at ECH, the ETF’s correlation to copper prices is not readily apparent. The ETF’s materials sector weight is just 11.5%, or 650 basis points below the fund’s weight to bank stocks and well below the almost 28.5% allocated to the utilities sector. In fact, there is just one materials stock found among ECH’s top 10 holdings. However, ECH’s five-year correlation to JJC is 0.6.
“Yet monetary policy and stubborn highflation are far from Chile’s main challenges — fiscal and monetary prudence were never in question. For an economy that has undergone the bulk of the adjustment to lower terms of trade, the main near-term challenge is to provide a positive shock to confidence, which remains deeply depressed due to policy uncertainty, scandals and political polarization. Chile is right in its objective of addressing shortcomings in education and health care, thereby attempting to create a more inclusive society. Finding a broad compromise on how to best address these challenges would go a long way in starting to rebuild confidence in the policy direction,” according to a Morgan Stanley note posted by Barron’s.
iShares MSCI Chile Capped ETF
