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  • Earning With Colombia ETFs 0 comments
    Dec 7, 2012 6:44 AM

    Any one still attributing Colombia with Narco-Terrorism and Guerrilla Wars is in for a rude shock. In the last ten years Bolsa de Valores [Colombia's biggest equity exchange] has out performed all asset classes.

    Returns even better than Silver and Gold!
    Colombian Equity Market has been most successful among all South American nations with a collective return rate of 1606% between 2002 and 2012. - A Bloomberg Riskless Return Banking 2012 report.

    A nation with about 47 billion citizens [With more than 50% people less than 30 years old] has a GDP figure worth US$ 330 billion [A world Bank 2012 estimate] which has more than tripled from its sub $100 billion levels since 2002. The economy has grown especially well in the past three years bucking a very slow global activity.

    Colombian riches are known to none…

    The country is blessed with a plethora of natural resources and mineral reserves. It is one of the major exporters of Gold, Oil, Coal and Coffee. The oil reserves are third largest in Latin continent behind Brazil and Venezuela. Its natural resources of gold and copper are among the best in the world.

    Colombia's proven oil reserves stand at +3billion barrels, when more than 90% of the land is still untouched and has not experienced any exploration. Now even if we consider 50% of the untapped land un-drillable due to ecological reasons, we would still be left with more than 20,000 square miles. "Some potential" most would say!

    The long started uptrend in commodity prices has been the biggest driving force for the economy and in all probability will continue to be in future. The rising demands of commodities from emerging economies like China and India will also accelerate growth of the Colombian companies and the Colombia Top 20 Index based funds.

    The leadership at the helm of the South America's third biggest economy have rose to the occasion more than once, to prove their sincerity in providing a secure environ for investors and encourage liberal trade to the hilt. As a result Colombia now has existing Free Trade Policies with USA and European Union [Its biggest trading partners] along with existing significant ties with China, the country shares a healthy trading bond with its neighbours as well.

    The returns on the investments along with a trade-friendly political frame work makes a compelling case for investments in Colombia centric investment products tracking the performance of the FTSE Colombia Top 20 Index, which is made up of the 20 most liquid stocks listed on the country's market. The Pro Trade stand of the Government will only add on to the security and gains of the investors with vested interests in selected Colombian funds and equities.

    Equity wise:
    Bancolombia and Ecopetrol, both are heavy weight stocks from Colombia equity markets and may offer a general view of their parent market. If one considers the past performance of their derivatives listed on New York Stock Exchange acting like growth pointers. Then we are headed in the right direction.

    Both companies' American derivatives [ADR] were up by 45% and 70% in 2010, and during the same time a Global X ETF Colombia rose up to +50%.

    As per an IMF report Colombia real GDP growth is pegged at 5% for 2012.

    Insurance giant Allianz endorses a "low risk" rating for Colombia and Peru.

    Standard and Poors [S&P] and Fitch, both agencies have given strong credit ratings for the country putting Colombia in the same league as Brazil, Ireland and Italy.

    Buying in through a FTSE Colombia ETF.

    The index ETFs provide a hassle free access to this promising market as in return one gets a direct exposure to the country's 20 topmost liquid stocks. At a time when the Latin economy is receiving rave reviews from renowned credit rating agencies world wide, a balanced exposure via a Colombian Top 20 index ETF makes good sense on the portfolio diversification front and much favourable to get you best returns on your investments.

    Global X Colombia ETF [ticker- GXG] follows the name sake FTSE benchmark. With a total of 23 stocks in the kitty, top three assets Bancolombia, Ecopetrol and Pacific Rubiales Energy account for more than 34% of the assets. Size wise large cap equities account for 41% of investment with 36% and 23% for mid and small cap respectively. GXG operates at an expense ratio of 0.78%.

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