ETFs In Focus On Growth Forecasts For Latin America

Economic Commission for Latin America and the Caribbean (ECLAC), in its survey for 2017, forecasts that the region will grow 1.1% after consistent contraction in GDP growth.

The United Nations agency thinks that improving global economic sentiment coupled with stabilizing commodity prices will benefit the region. The report states that all countries in the region except Venezuela and Suriname and Saint Lucia in the Caribbean will witness positive growth. Venezuela is going through a major socioeconomic crisis and ECLAC sees its GDP falling by 7.2%.

Per Alicia Barcena, Executive Secretary of ECLAC, major macroeconomic policies would be needed in order to stabilize long-term growth prospects for the region.

While South America is expected to grow at 0.6% this year, major economies in the region are seen to be benefiting from the global economic sentiment.

Per Markets Insider, ECLAC expects Brazil EWZ - iShares MSCI Brazil Capped ETF) to grow 0.4% this year. It expects Argentina ARGT - Global X MSCI Argentina ETF) to grow 2% in the year, owing to expansion in public and private investment. It also expects Chile (WA:ECH) - iShares MSCI Chile Capped ETF) to grow 1.4% in the year, whereas Colombia ICOL - iShares MSCI Colombia Capped ETF) is expected to grow 2.1%, as economic activity expands. Moreover, it sees Mexico EWZ - iShares MSCI Mexico Capped ETF) growing at 2.2%, although risks of protectionism cloud the outlook. It sees Peru EPU - iShares MSCI All Peru Capped ETF) growing at 2.5% in 2017, owing to increase in mining production (read: Comfortable Escape for Brazilian President: ETFs in Focus).

In the current scenario, let us discuss a few ETFS focused on providing exposure to Latin American equities (see all Latin American Equity ETFs here).

iShares Latin America 40 ETF ILF

This fund focuses on providing exposure to Latin American equities. It tracks the S&P Latin America 40 Index.

It has AUM of $1.04 billion and charges a fee of 49 basis points a year. From a geographical perspective, the fund has top exposures to Brazil, Mexico and Chile, with 56.10%, 26.96% and 10.69% allocation, respectively (as of August 3, 2017). From a sector look, Financials, Materials and Consumer Staples are the top three allocations of the fund, with 35.58%, 16.45% and 16.15% exposure, respectively (as of August 3, 2017). Itau Unibanco Holding ADR, Banco Bradesco ADR Reptg Pref SA and Ambev ADR SA are the top three holdings of the fund, with 9.06%, 6.83% and 6.11% exposure, respectively (as of August 3, 2017). The fund has returned 20.81% year to date and 16.67% in the last one year (as of August 4, 2017).

First Trust Latin America AlphaDEX Fund (AX:FLN)

This fund focuses on providing exposure to Latin American equities.

It has AUM of $26.36 million and charges a fee of 80 basis points a year. From a geographical perspective, the fund has top exposures to Brazil, Mexico and Chile, with 61.23%, 16.13% and 15.81% allocation, respectively (as of August 4, 2017). From a sector look, Financials, Materials and Utilities are the top three allocations of the fund, with 25.93%, 25.52% and 19.85% exposure, respectively (as of August 4, 2017). Grupo Elektra, S.A.B. de C.V., Fibria Celulose S.A. and Suzano Papel e Celulose S.A. (Preference A) are the top three holdings of the fund, with 6.04%, 3.71% and 3.57% exposure, respectively (as of August 4, 2017). The fund has returned 13.49% year to date and 12.76% in the last one year (as of August 4, 2017).

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