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Chile Keeps Key Rates Intact: ETFs in Focus

Zacks Equity Research

The Central Bank of Chile kept its benchmark interest rate unchanged at 2.5% on June 15, 2017. The decision was quite expected by the markets.


It last lowered the benchmark rate by 25 basis points in May 2017. The Central Bank has slashed rates by 100 basis points so far this year. However, the bank provided no guidance on further rate cuts.


Chile’s consumer prices rose by 2.6% year over year in May 2017 compared with 2.7% increase in April. The Central Bank stated that inflation expectations are in line with its 3% target rate.


Another major development in the country’s banking system is the new bill on Basel III reforms. The country’s government has sent a bill to the Congress urging banks to adopt the Basel III accord. It is expected to safeguard banking operations by following standardized measures in order to help integrate the country’s financial systems with the global financial system.


Let us now discuss the most popular ETF focused on providing exposure to Chile (see all Latin American ETFs here).


iShares MSCI Chile Capped ETF ECH


This fund focuses on providing exposure to Chilean equities. It tracks the MSCI Chile Investable Market Index.


It has AUM of $454.19 million and charges a fee of 64 basis points a year. From a sector look, Utilities, Financials and Materials are the top three allocations of the fund, with 27.01%, 17.94% and 13.45% exposure, respectively (as of June 16, 2017). Enel Americas SA, Empresas Copec S.A. and S.A.C.I. Falabella are the top three holdings of the fund, with 8.76%, 8.27% and 8.15% exposure, respectively (as of June 16, 2017). The fund has returned 20.93% in the last one year and 16.03% year to date (as of June 16, 2017). It currently has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.


Let us now compare the performance of this fund to a broader Latin American ETF, ILF.


iShares Latin America 40 ETF ILF


This fund focuses on providing exposure to Latin American equities. It tracks the S&P Latin America 40 Index.


It has AUM of $984.46 million and charges a fee of 49 basis points a year. From a geographical perspective, the fund has top exposures to Brazil, Mexico and Chile, with 54.26%, 28.05% and 10.98% allocation, respectively (as of June 16, 2017). From a sector look, Financials, Consumer Staples and Materials are the top three allocations of the fund, with 34.84%, 16.68% and 15.57% exposure, respectively (as of June 16, 2017). Itau Unibanco Holding ADR, Banco Bradesco ADR Reptg Pref SA and Ambev ADR SA are the top three holdings of the fund, with 8.81%, 6.30% and 5.86% exposure, respectively (as of June 16, 2017). The fund has returned 20.53% in the last one year and 9.86% year to date (as of June 16, 2017). It currently has a Zacks ETF Rank #3 with a High risk outlook.


Below is a chart comparing the year-to-date performance of the two funds.


 
Source: Yahoo Finance


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ISHARS-MSCI CHL (ECH): ETF Research Reports
 
ISHARS-LATIN 40 (ILF): ETF Research Reports
 
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