travel to chile

Chile is one of the few emerging market countries that is holding up well this year. The Bank of New York Mellon Chile ADR Index is up 9.05% year-to-date. Though the economy of Chile is heavily dependent on exports of commodities such as Copper, in recent years the economy has become more diversified. The domestic economy is strong due to various policies implemented by the government.

While there are a few Chilean stocks trading as ADRs in the US, the easiest way to invest in Chile is via the iShares MSCI Chile Investable Market Index ETF (ECH) and the closed-ended fund The Chile Fund (CH). These two funds give broad exposure to many Chilean stocks.

1. iShares MSCI Chile Investable Market Index ETF (ECH):

Launched in 2007, this ETF has about $150M in assets. The current yield is 1.96% and the expense ratio is 0.63%. Year-to-date the fund is up 12.34%. Since inception the fund is down 24.80%.

One of the pros of this fund is that it has only 9% of the assets invested in financials. Energy, Utilities and Industrials account for a major portion of the portfolio.

2. The Chile Fund (CH)

Currently CH is trading at a discount of 14%. The fund has an asset of base of $106M and the yield is 1.53%.

The fund made a return of 49.58% in 2007 when Chilean stocks were hot due to the commodities boom. In 2008, it gave back all the returns from 2007 and ended the year with a loss of almost 52%. Year-to-date the fund is up about 12%. Similar to the ETF, the assets of the fund are widely allocated among various stocks in different sectors.

Both the closed-end fund and the ETF are smart options get exposure to Chilean stocks. However CH will be much more volatile than the ETF in these turbulent times since it is a closed-ended fund.

Back in January Marketwatch has an article titled Looking for defensive exposure? Try Chilean stocks. In this piece, Geoffrey Dennis, Latin America strategist at Citigroup, said “Chile always outperforms in down markets. There’s always been a substantial pool of domestic liquidity and that’s been a stabilizing force in the market.”

Chile is being referred to as 'the Switzerland of Latin America' due to several factors such as the safety of the juridical system, the economy which is strong and on the increase, the multiple universities and high level of education. Many international investors have are now looking towards investing in the Chilean real estate sector. Investing advantages are the Chilean 'Unidad de Fomento' and the increasing middle class that will possess a high purchasing power in the following years.