2 Latin American ETFs for 2011
China gets the emerging-markets spotlight, but things are also bright in Brazil, Chile and Peru.
By Kevin Grewal, TheStreet
As the developed world continued to struggle out of the Great Recession in 2010, emerging markets performed relatively well, and they're expected to sustain their growth and performance in the coming year.
China continues to draw headlines and steal most of the attention, but in the coming year, Latin America may be the place to look.
Inflationary threats and real-estate bubbles have forced China to increase its benchmark interest rates for the second time in three months and increase banking reserve ratios to reduce risk, which could hinder future growth.
A different song is being sung in Latin America, as inflation is expected to remain subdued. This is expected to lower pressure on central banks to raise interest rates.
According to experts at Bank of America/Merrill Lynch, the true driver behind Latin America's prosperity in the coming year is expected to be domestic consumption driven by increased purchasing power.
Many Latin American nations, such as Brazil, Chile and Peru, are rich in commodities. As demand for energy commodities such as crude oil and agricultural commodities such as corn and sugar remain insatiable worldwide, these nations are bound to reap the benefits of rising commodity prices. Increased commodity prices and underleveraged companies and households create the perfect mix to fuel domestic growth in these nations.
To gain access to Latin America, one could consider the following:
1. iShares S&P Latin America 40 Index Fund (ILF) is a diversified play on Latin America that allocates 56.45% of its assets to Brazil, 24.53% to Mexico, 12.29% to Chile and 5.98% to Peru. ILF allocates nearly 26.2% of its assets to materials, 21.9% to financials and 12.8% to consumer staples.
2. SPDR S&P Emerging Latin America ETF (GML) allocates 64.57% of its assets to Brazil, 20.58% to Mexico, 10.41% to Chile and 4.45% to Peru. GML devotes nearly 24.7% of its assets to materials, 19.9% to financials and 13.4% to energy.
Kevin Grewal is the editor of SmartStops.net. At the time of publication, he had no positions in the funds mentioned.
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