Prospective emerging markets (EM) investors have options when it comes to looking overseas for growth. One option is Colombia and the Global X MSCI Colombia ETF (GXG).

EM opportunities certainly had their fair share of obstacles. Obviously, the pandemic roiled EM economies around the globe, and a stronger dollar didn’t help their cause.

Certain countries and funds, however, have been able to prosper despite the speed bumps. For example, there’s Colombia and the GXG ETF, which is actually up 7.53% year-to-date.

The country’s economy has been resilient in the face of the pandemic. The country did experience a Q4 lull, but overall, had an excellent 2021.

“Colombia’s economic growth probably slowed in the final quarter of 2021, but is expected to have hit a new annual record after authorities lifted coronavirus curbs and adopted expansive policies, a Reuters poll showed on Friday,” a WTVB report says. “According to the median forecast from 16 analysts, Colombia’s fourth-quarter gross domestic product (GDP) is forecast to have grown 8.5% compared with the year earlier, slowing from 13.2% in the third quarter.”GXG Chart

Colombia Growth Encapsulated in an ETF

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 underlying index is designed to represent the performance of the broad Colombia equity universe.

Overall, GXG gives investors:

  • Long-term growth potential: Rebounding from the pandemic, Colombia’s GDP is forecasted to grow at rates exceeding 3% in 2022-2026.
  • Targeted exposure: The fund targets exposure to a single country.
  • Efficient access: Efficient access to a broad basket of Colombian securities.

 

One of the challenges of investing in any EM market, of course, is the geopolitical ramifications a country can bring. Colombia, specifically, will be experiencing presidential elections in May, which should have a significant bearing on the performance of its equities — something its investors should be aware of prior to investing in Colombia.

“Undoubtedly, politics will be key to economic performance this year and there is a non-negligible risk that it could affect recovery, as well as the medium-term outlook,” Andres Pardo, the head of strategy for macroeconomics in Latin America for XP Investments, said.

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