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Possible entry window to Chilean equities on the horizon

From the perspective of a foreign investor, Chile has always been seen within the Latin American neighborhood as a stable economy that, although it has low potential growth (of 2.1% according to the June IPOM from The Chilean Central Bank), it has clear rules, low unemployment and controlled inflation. However, that perspective changed somewhat after October 2019 and the related social crisis, and with the enormous fiscal and monetary stimulus in our country because of Covid 19. Currently, Chile faces presidential elections on November 21th (little over 5 more weeks). However, if there is a second round, those elections would be on December 19th.



The trajectory of shares in Chile on average has been downward in recent weeks, in part due to the incorporation of country risk by the eventual new Government and the not-so-pro-market policies that may exist in the next 4 years of the new President. The IPSA fell 20% from April 19th to May 20th (from 5 thousand to 4 thousand points; in part at least, due to the discussion of the third "10% AFP" withdrawal), and, after a recovery of 12 to 13% until the end of August, the downward trend has resumed where, in addition to the electoral risk, there is higher current and expected inflation versus what was forecasted a few months ago and, consequently, higher market rates (plus the discussion of the fourth "10% AFP" withdrawal that is currently in the table).



IPSA since March



You can't say when that downtrend will stop. What could be estimated is that, once the election risk is cleared, there should be a "relaxation" from the point of view of the risk incorporated in prices today and that could lead to a rally or eventual bottom in the stock market. Government changes not only in Chile but also abroad have been the prelude to turning points in trend changes in the stock markets (up or down).


With a USD at Ch$825, buying pesos for a foreign investor is another ingredient that adds to the potentially attractiveness of our country. In December of last year, I pointed out that around Ch$710, the USD in our country looked interesting to evaluate buying. I think we are close to an attractive price to consider taking the opposite position.






ps: for a few days, I have at your disposal a service where I share my investment ideas in "The Speculator's Picks" at www.fepic.cl. You can subscribe for free for 30 days. Here you will find the ideas that I am looking at for you to evaluate with your Investment Advisor. The objective is that these ideas are an additional input to the alternatives you see. The good thing is that they come from a former CIO and CEO of Family Offices and who currently manages accounts at www.ifgcapital.cl, so I think it is absolutely worth following them. It is important to mention that the comments of this article as well as none of the ones of www.fepic.cl are investment recommendations, but only the ideas I found interesting that I see in the market.


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