The collective market capital of the Andean economies is close to $669.30 billion; as per a 2012 World Federation of Exchanges survey, not only does the figure surpasses the Mexican Stock Exchanges by $200 billion but economist believe that in less than three years a united front will directly be confronting Brazil where the con current net market-cap was evaluated at $1.30 trillion at the time of the survey.
The Andean region of Latin America [Peru, Chile and Colombia] offers much more upside potential than the stronger neighbours like Brazil and Argentina. The biggest positives for these economies include a fast and constant economic growth for coming years which is further led by good governance and rising domestic consumption. A proven track record of inflation data at stable levels is another reason why investments in Peru ETFs or Chile ETFs along with selective Colombian equity have outshined the counterparts in the vicinity.
Uncertain times and global slowdown call for a strategy that enables investment diversification and minimum risk taking opportunities. Entering emerging markets has become very popular with investors and seasoned traders. The commodity rich region of Latin America seems to abound with plenty of speculation propositions. One name that strikes is Brazil as most of the ETFS tracking Latin America invest a major portion of their asset base in the above mentioned nation.
But investors pay equal attention to the neighbours that have in fact outshined Brazil. For ETF owners Peruvian, Colombian and Chilean economies have turned out to be comparatively better options. These nations have better GDP growth than Brazil; also their inflation levels are moderate suggesting a uniform growth graph for the near future. The rising prices of commodities and increase in industrial demand contribute in an advantageous manner to these commodity rich regions. At the same time consumer demand is on the rise in these nations of the Andean. Political scenario is extremely stable putting forth congenial conditions for individuals to put in their money in this part of the globe.
The Chilean economy is growing at a pace of 4.3%. The past records demonstrate it as outshining Brazil and Argentina. Its companies are thriving and the stock market scene is fairly liquid. This mineral rich land is the largest producer and exporter of copper.
In a bid to overcome losses caused due to weak European market Chile has now established strong trade tie ups with Asian economies.
Latin American ETF investing extends its reach to Peruvian Economy. According to the International Monetary Fund this region has expanded at the rate of 5.9% in the last year. It is one of the largest producers of precious metals like gold and silver. The economy of Peru has got a boost from rising internal as well as external demand dynamics.
The fourth largest economy around Andes is that of the nation of Colombia. It has a good fiscal position and healthy ties with the United States. Its inflation figures are well under control. It is also benefitted with its vast coal and oil deposits and immense untapped natural resources.
Stockholders and investors wanting to play these three economies can pick ETFS (equity traded funds) specializing in providing exposure to all under one basket, and tracking the andean global x fund; the benchmark provides exposure to 41 largest and the most liquid securities across the three countries of this respective region. From the country point of view Chile is placed at the top with 39% of allocation, Colombia gets 30% of share and Peru holds the last position and makes up for 11% of the FTESE Index. The year to date returns of 19.43% (as on 31/12/2012) easily ranks the asset class among the top market products available globally and the coming year should be no different.
Global X Andean ETF [AND] is a pure play on the region and the name sake Index. With regards to sector allocations, 76% of the fund is made up of these four sectors - Basic materials (24%), Financials (24%), Energy (15%) and Utilities (13%). The issuers charge annual expenses of 0.72% and Eco-Petrol ADR is the top asset for Andean Fund with close to 10% allocation.