Chile (ECH) : No obstacle on the horizon – 25/10/2017

iShares MSCI Chile (ECH) - 25/10/2017

Short Term strategy : Positive (90%) / Trend +
Long Term strategy : Positive (100%) / Trend +

Characteristics of the ETF

The Lyxor ECH ETF (MSCI Chile) created in 11/2007 , is listed in USD 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 0.60% and the AUM are approximately $ 576M. The replication is direct and dividends are distributed.

Alternative ETFs: None


Index & components

The ETF ECH (Ishare) 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 (US $ c.240bn in 2016). 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 2017-2020 is more promising, with an expected growth rate around 2% in 2017 and 3% beyond, even if compared to the years of the commodity boom, it 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 business in Chile, which is probably the main catalyst in the short term.


Latest developments

In our latest analysis of 14/06/2017, "On a freeway" we wrote "The Chilean index enjoys a particularly attractive long-term graphical configuration. The round-bottom formation is a new favorable argument for a rise in the index.” The index has risen 17% since, confirming this favorable configuration.
The ETF ECH achieved a 17% performance in 2016, partially erasing the 2015 drop (-20%), in the wake of falling commodity prices, while since the beginning of 2017 ECH has been progressing. This performance is close to 36%, which is quite correlated with that of copper, which has gained almost 24% in 2017. The reduction of copper overcapacity in China, coupled with the favorable long-term outlook for this ore due to the development of the electrical car and renewable energy is driving up prices. A possible US investment program in infrastructure and the likely end of recession in Brazil (despite the repeated sandals) also bode well for the coming months.

Monthly data

The monthly chart shows a positive long-term trend, which accelerates strongly by validating a "round bottom" structure. The MACD has turned upwards after a long period of decline. The rise seems irresistible until the next levels of resistance located 30% higher towards $ 67 which corresponds to the level of 2012/2013.

The freeway is therefore still active and the current acceleration is not really an obstacle in the short term.

Weekly data

On the weekly chart, we can observe the ongoing uptrend that is developing without encountering any significant obstacles. The absence of resistance up to the level of $ 67, as well as a favorable technical configuration over all time horizons should favor the continuation of this strongly bullish trend.


ETF Objective

The iShares MSCI Chile Capped ETF seeks to track the investment results of a broad-based index composed of Chilean equities (33 companies)


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 572 M$
Dividend Distribution
Replication Method Direct
Currency Risk Yes
Number of Holdings 33
Risk 4/5

Country Breakdown

Chile 100%

Sector Breakdown

Utilities 25%
Financials 17%
Materials 16%
Consumer discretionary 11%
Energy 9%
Consumer staples 8%
Industrials 6%
Telecom Services 3%
Real Estate 3%
Information Technology 2%

Top Ten Holdings

SACI Falabella 9%
Empresas Copec 9%
Enel Americas 8%
Banco Santander Chile 6%
Empresas CMPC 5%
Latam Airlines 5%
Cencosud 4%
Banco de Chile 4%
Enel Generacion Chile 4%