CHICAGO, May 2, 2012 /PRNewswire/ -- Stocks and funds in this article include GlobalX FTSE Colombia 20 ETF (GXG) and Market Vectors Colombia ETF (COLX) Neena Mishra explains why the Colombian economy may continue to grow and looks at two ways the investors can gain access to the rising markets of Colombia via ETFs.
Why Colombia ETFs May Continue to Rise written by Neena Mishra, CFA of Zacks Investment Research:
Colombia, a country once known for its political instability, guerilla wars, high crime rate and drug trafficking has now turned into an investor hotspot in Latin America.
The economy grew at 5.9% in 2011 and is projected to grow at 4.7% and 4.4% in 2012 and 2013 respectively (per IMF). GDP per capita has gone up more than 60% in the last ten years, backed by a surge in oil output and sound economic policies. Both imports and exports have quadrupled during the last decade.
Growing consumer demand in the country caused a rise in inflation to well above the midpoint of the central bank's target range (though among the lowest in the region), leading to rate hikes, last year and earlier this year. However the inflationary pressures have now started stabilizing.
Yesterday, the central bank left the rates unchanged at 5.25% for the second month in a row and extended a dollar-buying program aimed at containing the appreciation of the Colombian peso against the US dollar. Despite central bank's dollar purchases, the peso is already up 9% against the dollar this year. Colombia stock market has also been rising to reach its highest level since March last year.
(See more on ETFs at the Zacks ETF Center).
Global X FTSE Colombia 20 ETF (GXG)
Designed to track the FTSE Colombia 20T Index, GXG made its debut in February 2009. The index is a market capitalization weighted index of 20 most liquid stocks in the Colombian market. The fund charges 78 basis points annually and has returned almost 200% to the investors since inception. Currently the fund has $174.0 million in net assets and 21 holdings. In terms of industry breakdown, material stocks have 26% weight, followed by financial services (21%) and energy (14%). The fund has returned 26.7% year-to-date.
Market Vectors Colombia ETF (COLX)
COLX seeks to track the Market Vectors Columbic Index, which provides exposure to publicly traded companies that are domiciled and primarily listed in Colombia or derive at least 50% of their revenues from Colombia. The fund was launched in March last year and charges 75 basis points in expenses. The ETF currently holds 28 securities. In terms of sector exposure financials have about 40% weight, followed by energy at 27% weight and materials at 14% weight. The fund has returned 20.3% year-to-date.
For the rest of this ETF article, please visit Zacks.com at: http://www.zacks.com/stock/news/74153/why-colombia-etfs-may-continue-to-rise
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Contact: Neena Mishra
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