Chile (ECH) : in the wake of copper

iShares MSCI Chile (ECH) - 06/07/2018

Short Term strategy: Negative (0%) / Trend -
Long Term strategy: Negative (30%) / Trend -

Characteristics of the ETF

The Lyxor ECH ETF (MSCI Chile) created in 11/2007 is listed  on the NYSE and seeks to replicate the MSCI Chile Index IMI 25/50 Index composed of 33 Chilean stocks.

The fees for this ETF are 0.62% and the assets under management approximately $ 360M. The replication is direct and there is a dividend distribution policy.

Alternative ETFs: N / A

Index & components

The ETF ECH (iShares) offers diversified exposure to the Chilean economy, across many sectors and 33 industrial, financial or service companies.

The advantage of this ETF is that it is not limited to a commodity exposure (only 16%) and responds to a real sector diversification.

Chile's economy is dominated by the industrial and service sectors. Both sectors contribute over 96% of GDP ($ 247bn). The main sectors of activity in Chile are mining (copper, coal and nitrate), manufactured products (agro-food processing, chemicals, wood) and agriculture (fishing, vineyards, fruit).

The three main challenges facing the Chilean economy are the exit from the traditional dependence of the economy on the price of copper (copper production represents 50% of the country's exports), the development of food production self-sufficient (current agricultural production covers less than half of the country's needs) and increased productivity, especially in the mining sector. After years of steady growth, Chile faced a major economic slowdown in 2015 due to falling copper prices as the country is the world's largest copper exporter. Due to lower demand in major emerging markets, growth was moderate in 2016 (1.8%).

However, the outlook for 2018-2020 is more buoyant, with an expected growth rate at around 3%, even if compared to the years of the commodity boom, this remains modest. Chile has invested heavily in renewable energies, which are expected to account for 20% of the country's energy production in 2020. Chile is also increasing its economic partnerships, particularly with China and Canada, and is a reference country in the world. South America for political stability.

The relative weakness of the dollar and a less aggressive FED are also doing Chile's business, but this seems much less obvious in recent weeks.

Latest developments

The ETF ECH achieved a performance of 41.85% in 2017 this performance is quite correlated with that of copper, which gained almost 24% in 2017.

However the Chilean index fell by about 13% in 2018, in the wake of the decline in copper - which is explained by fears about growth while the trade war declared by D. Trump to its main trading partners could significantly affect the demand for minerals such as copper, which are essential to the Chilean economy.

In addition, the sharp rise in the US dollar and ten-year rates are unfavorable to the economy, in the sense that commodities are inversely correlated to the dollar and capital outflows penalize the economy. The chili seems a collateral victim of the D.Trump's politics.

Weekly data

The weekly chart shows a positive long-term trend that is trending downward. EMAs 13 and 26, which had crossed upward in early 2016, have now crossed downward, while the MACD is crossing the zero line negatively. The index is oversold but has become bearish in the medium term.

Daily data

On the daily chart, we can see that the fall is accelerating after a large gap left open in June. The technical indicators, however, show a significant oversold level that could provoke a rebound. Significant levels of support are at around $ 42.


ETF Objective

ECH is an ETF listed in USD, which seeks to replicate the MSCI Chile IMI 25/50 Index


Inception date 12/11/2007
Expense ratio 0,60%
Issuer iShares
Benchmark MSCI Chile IMI 25/50
Ticker ECH
ISIN US4642866408
Currency $
Exchange NYSE
Assets Under Management 360 M$
Dividend Distribution
Replication Method Direct (Physical)
Currency Risk Yes
Number of Holdings 33
Risk 4/5

Country breakdown

Chile 100%

Sector Breakdown

Utilities 21%
Financials 21%
Materials 14%
Consumer discretionary 12%
Consumer staples 11%
Energy 9%
Industrials 6%
Telecom services 2%
Real Estate 2%
Information Technology 1%

Top Ten Holdings

SACI Falabella 10%
Empresas Copec 9%
Banco Santander Chile 7%
Enel Americas 7%
Empresas CMPC 5%
Banco de Credito 5%
Latam Airlines 4%
Cencosud 4%
Banco de Chile 4%