ECH ETF

Chile's ETF has underperformed, but it is structurally one of the most attractive in Latin America. Chile's outlook has improved with the rise in commodity prices over the past few years. The country's ETF is surprisingly diversified and has broader exposure than many single country funds can offer.

The iShares MSCI Chile ETF provides diversified exposure to Chile's economy beyond Copper, with top holdings in Financials and Materials sectors. ECH is the only fund offering pure-play exposure to the Chilean equity market, with unique sector mix including Financials, Materials, and Utilities. While ECH has underperformed compared to the US S&P 500, it may offer long-term potential for investors seeking exposure to a well-diversified emerging economy like Chile.

ECH tracks Chile's investable market index and has a large exposure to its lithium industry, which will continue to be in demand for the production of EVs. Chile's economic growth was stifled in 2023, but key indicators suggest growth is on the horizon. ECH is well-positioned to offer investors both value and yield with possible upside potential.

The iShares MSCI Chile ETF has underperformed global stocks this year, with uncertainty around the rewriting of the constitution playing a part. We touch upon some notable macro cogs that are improving. ECH is dirt-cheap from a valuation angle, and the risk-reward on the charts looks compelling.

Coming off a blockbuster 2022, Chilean equities have begun to normalize lower. The economy is also starting to feel the impact of slower global growth, while political uncertainty looms large. Valuations screen cheaply at first glance but come with significant risks and cyclicality.

ECH provides exposure to the Chilean market, with financial and mining exposures. Chilean banking stocks benefit from lower interest rates and improving economic indicators on the back of peaked rates for some months. Mining exposures face uncertainty due to potential nationalization of resources by the Chilean government, although it is very unlikely to be an appropriation.

ETFs are one of the best ways to invest in the stock market. Instead of trying to find the best stocks out there that may or may need to improve over time, ETFs offer a much less stressful option allowing investors to have money in many different companies simultaneously.

An inflection point has emerged within Chile's financial markets, which could alter the destiny of iShares MSCI Chile ETF. In our view, Chile has developed a more competitive political landscape that could lend the nation's private sector the necessary latitude to thrive. The ETF's most prominent constituent is the world's largest lithium producer. Moreover, the company has plans to scale lithium.