The Lyxor LTM ETF (UCITS), created in 05/2007 quoted in Euro on Euronext and replicates the MSCI Daily Index TR Net Emerging Markets Latin America USD Index. The index values are selected to represent 85% of the market capitalization of the Latin America zone, while reflecting the economic diversity of this market. It is an index composed of 118 stocks, of which 62% of the capitalization comes from Brazil. The fee of this ETF is 0.65% and the amount of assets under management is approximately 61M €. The replication method is indirect (via a swap) and there is a dividend capitalization method.
Alternative ETFs: ILF (iShares in USD)
Index & components
The LTM ETF replicates a fairly broad index composed of 118 stocks from 5 countries. The country that is most represented is Brazil with 62% of the capitalization of the index followed by Mexico (21%), Chile (8%), Colombia (3%) and Peru (3%).
Three main sectors dominate the index: financials (34% of the index), basic materials (14%) and consumer durables (15%). The top 10 stocks in the index represent 42% of the index's capitalization (Vale, the Brazilian mining company and Itau Unibanco are the first 2 capitalizations with 6.2 and 6.8 %%) and the specific risk values are therefore quite low. Latin American countries are generally quite correlated in their stock market evolution, but with differences that can be explained by their exposure to certain sectors.
For example, Peru and Chile have an economy highly correlated with the mining industry (silver, copper ...), while Colombia and Mexico are more correlated with oil and Brazil has a much more diversified economy and to itself by its weight a significant impact on its neighbors.
In addition, a number of these emerging economies have more chaotic paths because of political problems (Brazil, Peru) or specific problems, like Mexico in the middle of a trade conflict with the USA. The Latin American countries are also suffering from the serious deterioration of the economy in Venezuela and Argentina, destabilized by the massive influx of migrants (Venezuela) and the fall of currencies which makes fear a contagion effect.
The zone is also very dependent on the USA and China for their exports, with sensitivity to the US dollar as well as US interest rates.
