Chile (ECH) : Will it confirm?

iShares MSCI Chile (ECH) - 15/02/19

Short Term strategy: Neutral (50%) / Trend =
Long Term strategy: Positive (60%) / 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 35 Chilean stocks. The fees for this ETF are 0.59% and the assets under management approximately $ 475M. The replication is direct and there is a dividend distribution policy.

Alternative ETF: N / A


Index & components

The ETF ECH (iShares) offers diversified exposure to the Chilean economy, across many sectors and 35 industrial, financial or service companies.

The advantage of this ETF is that it is not limited to a commodity exposure (only 13%) 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 2019-2021 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 quite correlated with that of copper which grew by nearly 24% at the same time. In 2018 the Chilean index fell by 20.6% against -22% for copper, and since the beginning of the year the index picked up 9.5% against + 5.4% for copper, the correlation is very well established.

Copper is a highly sensitive material for global growth due to its massive use in construction, automotive and industry in general. Naturally copper suffered in 2018 from the trade war that fears a weakening of the Chinese economy very focused on exports and the world's largest copper consumer. The rebound at the beginning of the year is justified by the hopes raised by the negotiations between China and the US on the one hand and by the more conciliatory attitude of the FED, which is pushing back the imminence of the recession US.

Through copper, the Chilean index is therefore mainly a macro-economic bet on global growth.

Weekly data

On the weekly chart we can see that a crossing of the EMAs13 and 26 is about to occur and to launch a very positive signal on the medium term horizon. Weekly crossings are quite significant if you look at the history, and usually announce the trend for several months. We will monitor the confirmation of this signal, as well as the possible exceeding of the zero line by the MACD.

Daily data

On the daily chart, we can see that the prices are giving back part of their rise at the beginning of the year. However, many support lines are present such as the EMA100, which should allow to put a halt to the current short-term correction. The index is at a key moment, which is the confirmation of the bullish reversal initiated in recent weeks.



ECH is an ETF listed in USD, which seeks to replicate the MSCI Chile IMI 25/50 Index (35 companies)


Inception 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 472 M$
Dividend Distribution
Replication Method Direct (Physical)
Currency risk Yes
Number of Holdings 35
Risk 4/5

Country Breakdown

Chile  100%

Sector Breakdown

Utilities 23%
Financials 21%
Materials 13%
Consumer Staples 12%
Consumer Discretionary 10%
Energy 8%
Industrials 7%
Real Estate 3%
Communication Services 2%
Information Technology 2%

Top Ten Holdings

Enel Americas 8%
Falabella Saci 8%
Empresas Copec 8%
Banco Santander Chile 8%
Sociedad quimica y minera de Chile 7%
Latam Airlines Group 5%
Banco de Credito 5%
Banco de Chile 4%
Enel Chile 4%
Empresas CMPC 4%