Hot prospects for Chile (ECH)
Two advisors, both with outstanding long-term records, see upside opportunity in iShares MSCI Chile (NYSE: ECH).
Here, Mark Salzinger, editor of The Investor's ETF Report, and Nicholas Vardy, editor of The Global Bull Market Alert, assess the prospects of the South American exchange-traded fund.
Salzinger explains, "Through the first three months of 2009, ECH was the best-performing equity ETF, up 15.8%; it should continue to produce strong relative performance.
"Though the Chile ETF doesn’t ever make much news or attract much investor attention, iShares MSCI Chile is ignored unjustly. Resource-rich, politically stable and increasingly prosperous, Chile is an attractive play on commodities and growing wealth in emerging markets.
"Copper drives the economy in Chile. The national copper company, Codelco, controls more than 20% of the world’s copper reserves. The needful industrial metal has made China the destination for 14% of Chile’s exports, the largest of any country (followed by the U.S. and Japan).
"Public debt is only 4% of Chile’s GDP, and its sovereign wealth fund tops $20 billion. Chile’s $4-billion economic stimulus, though small in relative terms, is one of the most robust in emerging markets as a percentage of GDP (about 3%).
"In addition, Chile boasts more bilateral free-trade agreements than any other country in the world, including with such economically significant players as the U.S., the European Union, China, Japan, Canada and South Korea."
Nicholas Vardy suggests, "Chile’s fundamentals make the economic ne’er-do-wells of the world green with envy. During the commodity boom of 2002-2007, Chile’s conservative economic policies were criticized for stifling growth.
"But thanks to its fiscal prudence, its lack of a domestic housing bubble, and its sizeable wealth reserves, Chile has weathered the current global economic meltdown better than most countries.
"While other Central and South American countries spent the bulk of the massive inflow of wealth to the region during the commodities boom, Chile built up a $$19.5 billion 'stabilization fund.' This large cash reserve meant policy makers were never forced to search for financing in a difficult market.
"Second, a bet on Chile is a highly leveraged bet on any upturn in the global economy. As the world’s largest producer and exporter of copper, Chile relies on exports for 43% of its GDP.
"Third, the Chilean ETF bottomed on Dec. 5 -- and has been on a more or less steady, upward path ever since. And just recently, it crossed its 200-day average -- perhaps the only emerging stock market in the world that is trading above this key technical level."
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