The iShares MSCI Chile Investable Market Index ETF (ECH) declined late on Monday morning about 2% to $55.6 a share, while the broader stock market and especially emerging markets traded higher. The Chile ETF rebounded after opening about 4% down.
A quake measuring 8.8 on the Richter scale hit the South American country hard on Saturday, killing more than 700 people and leaving more than 1.5 million people without electrical power, largely in the major city of Concepcion.
The market response to this disaster is a measure of Chile’s enduring attractiveness as a destination for emerging market investors.
Chile offers global investors the opportunity of gains from a country that has weathered the current global economic meltdown better than most countries. It is politically stable, resource rich and fiscally conservative and, since 2003, I have been in and out of Chile several times. As a percentage of GDP, Chile is the most export-oriented country in the world and has growing trade ties to Asia.
According to the Economist, the share of Chileans living in poverty fell from 38.6% in 1990 to 13.7% in 2006, and education, health care and pensions are now much more widely available.
Chile was down 52% in 2008 but came back strongly in 2009. The closed-ended CH is trading at close to an 11% discount to net asset value. The iShares ECH is now the best option for investors. ECH is a basket of 33 companies with a total market value in excess of $125 billion. It offers 29% to the utilities sector, 21% to materials, 19% to industrials and 9% to financials.
Copper, of course, is a big export and at the core of the economy, though Chile, like Norway, has been smart to put bonanza copper revenue into a rainy day fund.