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Latin American ETFs: Bargain Or Trap?

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Latin American ETFs: Bargain Or Trap?

There was a great divergence between regional stock markets around the world in the first quarter. Europe had a solid first three months of the year, along with China. The U.S. was basically flat, with the S&P 500 gaining less than 1 percent. Then there are the South American countries that took a beating, except for the oft-troubled Argentina.

Falling commodity prices, due to a rising U.S. dollar and slowing demand, have hit the region along with governments that are not considered stable, as compared to their peers. Interest rates have also been on the rise, making it more expensive for governments to borrow money.

The negatives outweigh the positives in the near-term; however, investors that are willing to look at the big picture could see an opportunity to buy into the region at a discount.

Some of the single-country ETFs in the region are highlighted below.

Related Link: Under Armour Madness In Latin America

Global X FTSE Argentina ETF

The Global X Funds (NYSE: ARGT) provides investors exposure to 25 Argentine companies.

The top holdings include:

  • Tenaris SA (ADR) (NYSE: TS) with a 20 percent holding
  • Mercadolibre Inc (NASDAQ: MELI) making up 14 percent
  • YPF Sociedad Anonima Adr (YPF SA (ADR)) (NYSE: YPF) coming in at 6.6 percent

The country is in the midst of major political issues; however, the stock market has been shrugging it off with ARGT up 12 percent in the first quarter. Going forward, the country expects GDP to grow by 2.8 percent in 2015; however, the IMF predicts a fall in the GDP by 1.5 percent. The performance the remainder of the year will be dependent upon which party is correct.

The ETF has an expense ratio of 0.75 percent.

iShares MSCI All Peru Capped ETF

The iShares MSCI All Peru Capped Index Fund (NYSE: EPU) provides exposure to a broad range of companies in Peru. The ETF is distributed across 26 companies in six sectors.

The top individual holdings include:

  • Creditcorp Ltd. (USA) (NYSE: BAP) at 22.5 percent
  • Southern Copper Corp (NYSE: SCCO) making up 17.6 percent of the ETF
  • Compania de Minas Buenaventura SAA (ADR) (NYSE: BVN) coming in at 6 percent

The region's fastest-growing economy over the last decade expanded by 2.4 percent in 2014, and growth in 2015 is expected to come in at 4.2 percent. The forecast has fallen from 4.8 percent earlier this year. The ETF has struggled this year, losing 11 percent.

The ETF has an expense ratio of 0.62 percent.

iShares MSCI Chile Capped ETF

The iShares MSCI Chile Inv. Mt. Idx. Fd(ETF) (NYSEARCA:ECH) consists of 36 Chilean companies across 10 sectors.

The top individual holdings include:

  • S.A.C.I. Falabella making up 11.5 percent of the ETF
  • Enersis SA (ADR) (NYSE: ENI) at 9.8 percent
  • Empresas Copec SA, coming in at 8 percent

The ETF performance falls into the middle of the group with a small gain of 1 percent in the first quarter. The country expects GDP to increase between 2.5 percent and 3.5 percent in 2015, up from 1.9 percent in 2014.

The ETF has an expense ratio of 0.62 percent.

Image Credit: Public Domain

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