Considered one of the most important countries for the global mining industry, Chile is set to benefit from a commodities bull market. We analyze the 3 most important stock market indexes in Chile.
With over 18 million people, Chile is a medium-sized economy in South America. Because it is smaller than some of its neighbors, including Brazil and Argentina, little attention is given to Chile by the financial press.
Nevertheless, Chile has two attractive things to offer to international investors:
On the one hand, Chile is one of the most stable countries in the region. Not only is the country politically stable, but its public finances could not be better. Chile managed to eliminate its public debt completely in the past. This given its currency, the Chilean Peso (CLP) a lot of stability.
On the other hand, the country’s number one export is copper. In fact, according to surveys carried out by some of the most prestigious institutions in the world, Chile has the largest copper reserves in the world.
Copper will be key for the economy of the future since both electric vehicles and the electrification of our energy system require vast amounts of it.
Consequently, demand for copper is likely to grow strongly over the next few years, resulting in an economic boom for the country.
For those interested in investing in Chile without having to select individual companies, we analyze its 3 most important stock market indexes.
S&P CLX IPSA
The main stock index of the Santiago Stock Exchange is the S&P CLX IPSA. Created in 1977 with the original name of Índice de Precios Selectivo de Acciones (IPSA), nowadays it is managed by the company S&P Dow Jones, which is also responsible for indices such as the S&P 500.
The IPSA is composed of the 30 stocks with the largest transaction volume on the Chilean stock exchange. It is updated every 6 months.
Within the index, stocks are weighted according to their market capitalization adjusted for free float. Hence, larger companies tend to dominate the index. However, no stock can represent more than 15% of the market capitalization of the index.
Some of IPSA’s most prominent companies are Sociedad Química y Minera de Chile, Banco de Chile, Banco Santander Chile and Empresas COPEC.
Here is the link to the website of S&P Global for additional details.
The Inter 10, whose complete name is S&P CLX Inter 10, is a Chilean stock index created for investors located in the United States. It is also calculated by S&P Dow Jones.
The Inter 10 follows the 10 largest Chilean companies listed on the New York Stock Exchange or NASDAQ through ADRs (American Depository Receipts).
An ADR is a security listed on a US stock exchange that represents a stock traded abroad. Therefore, ADRs are a tool for US investors to invest abroad through assets that are listed domestically.
Stocks in the Inter 10 index are weighted according to their market capitalization adjusted for free float. There is no cap when it comes to the weight that a stock can have in the index.
Finally, the MSCI Chile offers us an additional alternative. Calculated and published by MSCI, this index includes all Chilean stocks that can be found in the MSCI Emerging Markets index.
The number of stocks within the MSCI Chile fluctuates over time, depending on how many companies meet the criteria to be included in the MSCI Emerging Markets.
It should be noted that it is a fairly concentrated index, composed of just under 15 companies. As a consequence of that, it will have a significant correlation with the Inter 10, although the MSCI Chile is composed of shares listed in Chile, and not ADRs listed in the United States.
You will find more details about this index on MSCI’s website.
I hope you found this brief analysis about Chile’s stock market indices useful, and encourage you to subscribe to my newsletter:
And if you are interested in investing in copper, check out the following link:
Investing in Copper – 8 Reasons and How to Do It