With the Mini Explosion in the Country’s Commodities Now is a Good Time to Invest in Chilean Stocks

Demand continues for commodities and the rush to acquire the world’s natural resources is giving emerging markets and international stock indexes steady growth.

Chile's Ipsa (Indice de Precios Selectivo de Acciones) exchange which lists 40 of the country’s own blue-chip stocks, closed higher last week, an upturn brought on by higher international commodity prices. The past six months have seen the Ipsa rise 33% and nearly 800 points from 2,400 to a high over 3,200. On Friday, the Ipsa closed at 3,104.43. A complete data sheet on Chile’s economy can be viewed at this page www.emerginvest.com/WorldStockMarkets/Chile/Country_Facts.html.

The Ipsa is made up of 40 of Chile’s stocks with the highest average annual trading volume in the Santiago Stock Exchange (Bolsa de Comercio de Santiago). Last week’s strong close is a clear indication that the Ipsa is a market to watch and could produce nice short-term returns for active investors. You can watch the Ipsa on Bloomberg’s website by clicking this link - http://www.bloomberg.com/apps/cbuilder?ticker1=IPSA%3AIND.

It’s no surprise that the Ipsa has been Latin America’s best performing exchange for nearly two years now. 2008 was particularly harsh on Latin America. Chile was the best performing market and that only meant the Ipsa had the smallest decline at just over 20%.

With Brazil on the side of South America, commodities make up almost half of its Brazil exchange. The Bovespa experienced a record 40% decline in 2008, in comparison to the MSCI Emerging Market Index which dropped over 50% as high risk investing was frowned upon after the collapse last fall.

The Ipsa Index is focused on energy stocks instead of commodities like Brazil’s Bovespa Index. For this reason, the recent growth in the Ipsa may indicate Chile’s insulation from the market forces facing other exchanges throughout Latin America, another reason to take advantage of Chile’s growth. Even if a global recession continues in the short-term, Chile may perform much better in a prolonged downturn than most emerging market indexes.

The Inter-10 is comprised of 10 principal Chilean stocks that are traded in foreign exchanges which possess a high traded volume in the local Chilean market. The Inter-10 are also members of Chile’s Ipsa market. This month, the Inter-10 hit reached it’s all-time high. To track the Inter-10 on Bloomberg use this link - http://www.bloomberg.com/apps/cbuilder?ticker1=INTER10%3AIND.

Chile is still known for vast metal deposits, huge offshore fisheries, and agriculture production. The Ipsa index is expected to continue to overpower other indexes in the region as President Michelle Bachelet has expressed plans to begin using $22 billion in cash reserves saved over the course of the country’s four-year explosion in its #1 export, copper. China will continue to gobble up Chile’s copper for its own stockpile back home, and this help Chile’s economy to continue to grow for what could be the next two to three years. But the demand for copper will one day diminish. Until then, Chile’s stock markets are one of the few investments which are now red hot.