What Jumps Out – The Chileans Are Here!

Tuesday was a historic day in Colombia – not because the football team managed to snatch a 2-2 draw against Argentina in a World Cup qualifier, but because it represented the first time ever that local investors could buy and sell Chilean stocks in local currency.

The listing of 5 Chilean names (Banco de Chile, SQM, Cencosud, Falabella & Enel) is the result of an agreement with the BCS in Chile to allow the cross-listing of assets on the local exchange. Colombia’s MGC (Global Market) has been around since 2012 when a number of US stocks were listed – if this structure sounds familiar it is the same concept that can be found across Latam, the SIC in Mexico and CEDEAR in Argentina being two of the most well-known.

In Colombia this market has been a slow burner for a number of reasons but hopefully, now its time has come. In the absence of new equity issuance and several de-listings there has been a growing clamor for new blood among investors who have seen their list of options shrinking.

These five shares bring diversification – with the advent of the MSCI COLCAP we saw the disappearance of Exito from the index giving investors little option in terms of the retail sector. The new boys on the block, such as D1 or ARA, which have been so disruptive to the sector, still haven’t displayed any ambitions to issue equity and therefore the arrival of Cencosud and Falabella are a new option. Falabella since the day it arrived in Colombia has made a tremendous impact (try finding a wedding registry anywhere else) and Cencosud operating under the Jumbo brand, and now Spid35, is also well known in the country.

Rupert’s opinions & analysis as an independent expert contributor are his own and not necessarily those of Finance Colombia or the BVC.

Away from the welcome arrival of the Chileans, which will hopefully be available soon via the on-line trading platforms, there are a host of US names which have represented a major missed opportunity over the years, not least in 2020. Of the FAANG/Stay Home names, Apple, Amazon and Facebook all trade locally in Pesos, at a time when the COLCAP was floundering you would have made 100% returns on those names. Of course, not every year is a 100% year but it is good to have the opportunity in case. Another pair of names on the MGC have also been making a lot of headlines – Pfizer and Johnson & Johnson, who have been central to the global COVID vaccine campaign, are also listed here in Colombia, again 50% returns over the past year.

In Mexico the SIC is ~40% of the equity market and whilst in other countries such as Chile and Peru their equivalent markets trade much more modest sums – the BVC aims to be more of a protagonist to offshore assets which trade right here at home.

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Away from the World Cup and Chilean stocks the news in Colombia remains dominated by the ongoing national strike – which in reality is more local in nature.

There is still no sign of the ‘Reformed Tax Reform’ despite everybody discussing how urgent it is – it may not be the only demand of those protesting on the street but if structured in the right way it could take a lot of sting out of the situation.

The protests themselves are slowly bleeding into many aspects of life. Returning to football, Colombia has been stripped as host of the highly anticipated Copa America due to the unrest – the tournament hasn’t been held here for a long time and it has now been moved to Brazil despite the pleas of the Government.

Consumer Confidence was expected to suffer in May and it didn’t disappoint. The reading of -34.3 was the second worst of record (after April 2020) – it was though nowhere near as bad as the -41.1 anticipated by analysts. The reason for this IMO was that they seem to set aside the collapse between March and April.

Finally, inflation for May came in at 1% – well above the expectation of 0.79% and the previous month of 0.59%. This brought the 12m figure to 3.30% as opposed to the 3.08% anticipated. Again, the route of the problem was the protests. There are an abundance of surveys indicating that production companies are being affected by the demonstrations and on top of that there are supply chain issues due to road blockages. The coffee sector would be a prime example of the disruption – exports fell 52% in May as producers struggled to get their beans to ports. Construction is another area with the Chamber for that sector reporting that 1.3 million workers have been affected and that over 1,700 projects have been affected.

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The demonstrations themselves are slowly dissipating however that doesn’t mean that the situation can’t get worse again overnight. There is still a lot of tension surrounding the protests and much will depend on the government delivering on the promises thus far made in terms of youth unemployment and education – unfortunately they are not overnight projects.