The country has several catalysts that make it compelling. Chile is a commodity based economy as one of the world leaders in copper exports but it only exports roughly 15% to the US, meaning a slowdown here won't be a deathblow to Chile.
The economy is healthy but without the volatility people usually associate with Latin American countries. Inflation is around 3%, GDP growth is in the high fives, inflation is a comfortable (for the central bank) 3%, they have a current account surplus but unemployment looks a little high at about 8%.
On the negative side the economy may be slowing. GDP in 2005 was 6.3% but might slow to 5% by the end of this year. The central bank held rates unchanged at 5.25% after a series of hikes and may soon cut rates.
Another catalyst is that a portion of everyone's paycheck goes into the stock market in a sort of forced savings plan that was first implemented in 1981. This means there is always a small but steady buying demand hitting the market which potentially makes Chile less volatile than other emerging markets.This chart compares the benchmark IPSA index to iShares Emerging Market (EEM) and SPY.
In terms of volatility it looks more like the S&P 500 than the rest of emerging markets. The reduced volatility can be a negative like it was during the first few months of this year and be a positive as it was during the correction in May and June. I would also note for the last 12 months the IPSA is lagging both EEM and SPY but YTD it is ahead of both EEM and SPY.
For people willing to assume single stock risk from Chile the dividend yields tend to be high and conservatively covered.
4 comments:
I would be interested to know the name of the bank in Chile listed on the NYSE.
Banco de Chile is one
http://secfilings.nyse.com/
files.php?symbol=BCH
Depending on how much macro-crunching you like to do the IMF information can be interesting.
http://www.imf.org/external/
country/CHL/index.htm
russell
I did business in 6 S. American countries in the '90s, and Chile really was unique. Sane, stable, and predictable. Limited home market is the only constraint on growth. Many Chilean companies have expanded into neighboring countries, and take their good management stle with them. - Jock
I don't have any Chilean stocks right now, but I have owned shares of Mexican companies. Besides Chile, other Latin American countries are also doing well. Brazil has great companies like Petrobras (oil company) and Unibanco (Brazilian bank). And Mexico's market is close to an all-time high again. Great Mexican companies include America Movil, and Cemex.
Peter
(Freelance blogging on Moneyfingers Blog: Adventures in Personal Finance and Investments)
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