Colombia is one of the region’s largest economies, with vast amounts of natural resources. We analyze the 3 most important stock market indexes for Colombia.
With 50 million people, good demographics, an economy with potential to grow, natural resources and a cheap stock market, Colombia can offer very good opportunities to investors.
Given that most of its listed companies are fairly small, it can be tricky to analyze and pick individual stocks.
For this reason, we will analyze the 3 most important stock market indexes in Colombia, so that you can find an ETF to get exposure to the country’s economic performance.
It is worth highlighting that Colombia, like most stock markets in South America, trades at very low valuations. This could change if we experience a commodities bull market, and the region is favored by international investors again.
The COLCAP stock index is the most important of the Colombian Stock Exchange (Bolsa de Valores de Colombia or BVC, in Spanish). The COLCAP is composed of 20 of the most liquid and largest companies in the country.
Originally published by the Colombian Stock Exchange, nowadays the COLCAP is owned and calculated by the US company MSC. Therefore, the index’s official name is MSCI COLCAP.
Within the index, the 20 stocks are weighted according to their market capitalization adjusted for free float. Hence, bigger companies tend to dominate the index.
The COLCAP is a fairly diversified index, where the sectors with the largest weight are banking, energy, oil and materials. Consequently, the index is very well adapted to thrive in times of elevated inflation.
If you want to read more details about the COLCAP, you can take a look at the official website of the Colombian Stock Exchange.
Another stock index calculated by MSCI is the MSCI Colombia. However, there are important differences between the MSCI Colombia and the COLCAP.
The MSCI Colombia contains all Colombian stocks that are part of the MSCI Emerging Markets index.
The exact number of stocks within the index fluctuates over time, depending on how many companies meet all inclusion criteria. Most of the times, we can only find between 5-7 stocks in the index.
For this reason, the MSCI Colombia is much more concentrated and less diversified than the COLCAP. Here is the link to the MSCI website.
Finally, the company FTSE Russell, a subsidiary of the London Stock Exchange, calculates its own stock index for the South American country: the FTSE Colombia.
Its logic is very similar to that of the MSCI Colombia, since the FTSE Colombia is composed of all Colombian companies that can be found in the global stock FTSE All World Index.
As a result, the number of stocks within the FTSE Colombia varies over time, depending on how many companies meet the eligibility criteria. This is largely dependent on the exchange rate between the Colombian Peso and the US Dollar.
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And if you want to learn about taxes in Colombia, check out the following link:
Taxes in Colombia – A Complete Guide