Chile and Peru’s stock markets could be set for a rebound if copper prices pick up, analysts are predicting.
Economists expect copper prices to rise by the end of the year from their current multi-year lows. UBS is forecasting copper will reach $6,700, while Capital Economics expects $6,250. This could represent a buying opportunity for stock markets in major copper exporting countries, including Chilean and Peruvian equities.
Both markets are heavily exposed to copper mining companies, and Peru’s stock market tends to move in lock-step with the copper price. David Rees of Capital Economics is expecting gains of 15-20 per cent in both markets by the end of 2017.
“Strong increases in copper prices could underpin an outperformance of equity markets in Chile and, in particular, Peru over the next couple of years,” he says.
“History suggests that copper prices will be the most important driver of the two stock markets. This sets the scene for outperformance for equities in Chile and Peru in the coming years.”
Investors hoping to gain from this could purchase dedicated index funds focusing solely on these markets. iShares offers two: the iShares Trust MSCI All Peru Capped index fund or iShares Inc MSCI Chile Investable Market index fund.
Alternatively, there is an Andean exchange traded fund, the Global X Funds FTSE Andean 40, which invests in the 40 largest and most liquid companies on the Chile, Colombia and Peru stock exchanges.