New bourse to capitalize on demand for ‘emerging’ Latin America
An exchange offering stocks from Chile, Colombia and Peru is slated to start operating next week after months of technical and legal hurdles, seeking to capitalize on surging investor interest in the region.
The Mercados Integrados LatinoAmericanos exchange, scheduled to begin operating on May 30, will tie together the three countries that “really are the emerging part market of Latin America,” according to Bruno Del Alma, chief executive of exchange-traded fund firm Global X Funds.
The combination of the exchanges, dubbed MILA, “was a big factor in terms of us thinking about the region, but it underpins a much broader story about both the growth rates and growing political and economic integration across those three markets,” he said.
For companies aiming to raise funds, the integrated exchange will be able to increase the number of potential investors, said Alfredo Coutino, director of Latin American research, at Moody’s Economy.com.
“So now a Chilean company can go to the stock exchange and get money directly from Colombian investors,” he explained.
“There’s a long list of companies in these three countries that want to go to each of these markets.”
Earlier this year, in anticipation of the new exchange, Global X launched the Global X FTSE Andean 40 ETF /quotes/comstock/13*!and/quotes/nls/and AND +1.28% , the first ETF focused on the Andean region.
Chile, Colombia and Peru are three of the biggest markets in the region that’s home to the longest continental mountain range, the Andes.
Investors in Latin American assets not only want exposure to assets linked to the region’s natural resources, but also they aim to benefit from of its expanding middle class, analysts indicated.
Peru, whose main export is gold, and Chile, the world’s largest copper producer, are expected to have the fastest rates of economic growth in Latin America this year, with the International Monetary Fund forecasting Peru’s expansion at a rate of 7.5% and Chile’s at 5.9%.
The IMF expects the countries to lead growth in Latin America in 2012.
Politics
Investor enthusiasm for the region has been strong, driving stocks to double-digit gains last year. But so are the headwinds.
Peruvian stocks are facing a tough few months if Ollanta Humala, a presidential candidate who ran on a populist platform in his 2006 campaign, wins the upcoming election.
The exchange is expected to start operating just days before Peruvians go to the polls.
“If Humala is elected in June, you will have a period in which foreign investors,” along with other market players, will be “in a wait-and-see” mode, according to Salvador Arenas, an equity research analyst at Chilean brokerage Larrain Vial.
Peruvian stocks, as gauged by Lima’s broad general index, fell by as much as 15% for the year in U.S.-dollar terms in the weeks after Humala became the front-runner in first-round voting in late March.
The index has reduced its loss for the year to date to about 6%, in the wake of polls showing center-right candidate Keiko Fujimori gaining the advantage.
Fujimori is a member of Peru’s Congress and daughter of the jailed former president, Alberto Fujimori.
An exchange offering stocks from Chile, Colombia and Peru is slated to start operating next week after months of technical and legal hurdles, seeking to capitalize on surging investor interest in the region.
The Mercados Integrados LatinoAmericanos exchange, scheduled to begin operating on May 30, will tie together the three countries that “really are the emerging part market of Latin America,” according to Bruno Del Alma, chief executive of exchange-traded fund firm Global X Funds.
The combination of the exchanges, dubbed MILA, “was a big factor in terms of us thinking about the region, but it underpins a much broader story about both the growth rates and growing political and economic integration across those three markets,” he said.
For companies aiming to raise funds, the integrated exchange will be able to increase the number of potential investors, said Alfredo Coutino, director of Latin American research, at Moody’s Economy.com.
“So now a Chilean company can go to the stock exchange and get money directly from Colombian investors,” he explained.
“There’s a long list of companies in these three countries that want to go to each of these markets.”
Earlier this year, in anticipation of the new exchange, Global X launched the Global X FTSE Andean 40 ETF /quotes/comstock/13*!and/quotes/nls/and AND +1.28% , the first ETF focused on the Andean region.
Chile, Colombia and Peru are three of the biggest markets in the region that’s home to the longest continental mountain range, the Andes.
Investors in Latin American assets not only want exposure to assets linked to the region’s natural resources, but also they aim to benefit from of its expanding middle class, analysts indicated.
Peru, whose main export is gold, and Chile, the world’s largest copper producer, are expected to have the fastest rates of economic growth in Latin America this year, with the International Monetary Fund forecasting Peru’s expansion at a rate of 7.5% and Chile’s at 5.9%.
The IMF expects the countries to lead growth in Latin America in 2012.
Politics
Investor enthusiasm for the region has been strong, driving stocks to double-digit gains last year. But so are the headwinds.
Peruvian stocks are facing a tough few months if Ollanta Humala, a presidential candidate who ran on a populist platform in his 2006 campaign, wins the upcoming election.
The exchange is expected to start operating just days before Peruvians go to the polls.
“If Humala is elected in June, you will have a period in which foreign investors,” along with other market players, will be “in a wait-and-see” mode, according to Salvador Arenas, an equity research analyst at Chilean brokerage Larrain Vial.
Peruvian stocks, as gauged by Lima’s broad general index, fell by as much as 15% for the year in U.S.-dollar terms in the weeks after Humala became the front-runner in first-round voting in late March.
The index has reduced its loss for the year to date to about 6%, in the wake of polls showing center-right candidate Keiko Fujimori gaining the advantage.
Fujimori is a member of Peru’s Congress and daughter of the jailed former president, Alberto Fujimori.
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