by Richard Rittorno
Lately people have been asking me, “Where can I still invest? Did I miss the emerging market move?” My answer in one word: Chile. This Latin American country has some of the best growth potential over the next 18 months, and is a great way for traders to play the commodity market.
Traders can trade Chile here in the U.S. via the iShares MSCI Chile Investable Market Index Fund (ECH). This ETF seeks to correspond to the price and yield performance, before fees and expenses, of the MSCI Chile Investable Market Index.
The fund invests at least 90% of its assets in the securities of the underlying index or in depositary receipts representing securities in its underlying index. The underlying index is a free float-adjusted market capitalization index that is designed to measure broad-based equity market performance in Chile. The fund is non-diversified.
Chile is also a great way for traders to gain exposure to copper, as the country is the world’s largest producer of this key industrial commodity. It exports 30% to 40% of the world’s copper and is considered to have the largest reserves on the planet.
The Chileans are looking to make the most of these reserves, too. According to Minister of Mining Hernan de Solminihac, mining companies are investing $91 billion over the next eight years. This is expected to increase cooper production nearly 50% over the next decade.
Some analysts are concerned market demand won't absorb the new supply, and that copper prices will weaken.
That may happen, but the investments are a response to copper consumption demand from China and India, which Chile hopes will keep buying enough copper to let it increase its annual national production rate 44% to 7.5 million tons by 2022 from a projected 5.2 million tons this year. At the moment, there are good reasons to believe that these growing nations will buy all the copper that Chile can produce.