For Single-Country Exposure, Consider Colombia and 'GXG'

Investing in emerging markets can still a slippery slope to climb, but for single-country exposure, one option to consider is the Global X MSCI Colombia ETF (GXG).

Covid-19 continues to be an ongoing risk for the country of Colombia. A surge in Covid cases is still a thorn in the side for many countries, but a government’s ability to respond quickly could help stifle rising cases.

In the case of Colombia, lockdown restrictions were recently implemented.

“All major cities have issued lockdown decrees that are in place from Friday until Sunday in an attempt to slow down the spread of the coronavirus,” a Colombia Reports article noted recently. “This has apparently allowed to curb an increase of new infections over the past week.”

GXG seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI All Colombia Select 25/50 Index. The fund invests at least 80% of its total assets in the securities of the underlying index and in American Depositary Receipts (“ADRs”) and Global Depositary Receipts (“GDRs”) based on the securities in the underlying index.

It also invests at least 80% of its total assets in securities of companies that are economically tied to Colombia. The underlying index is designed to represent the performance of the broad Colombia equity universe.

GXG gives investors:

  • Efficient Access: Efficient access to a broad basket of Colombian securities.
  • Targeted Exposure: The fund targets exposure to a single country.

GXG Chart

Economic Growth in the Face of the Pandemic

Despite these ongoing challenges, Colombia is expected to experience economic growth. This is according to 2021 forecasts by the World Bank, which could in turn help GXG.

As such, the fund could be a value-oriented play for investors willing to ride out the economic effects of the pandemic.

“The Colombian economy will expand 4.9% in 2021 forecasts the World Bank, and number close to the global average 5%,” a The City Paper article said. “According to data released in the bank’s biannual report ‘Back to Growth,’ Colombia is modestly rebounding after the country suffered its worst recession in a half-century during the first year of the pandemic.”

“With the region among the most impacted in the world as coronavirus cases spiraled out of control, the World Bank’s analysis of the current reality is optimistic given that in 2019, the Colombian economy grew 3.3%,” the article added. “Among the setbacks in maintaining growth above 5% is deepening income inequality and vulnerable informal labor market.”

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