Colombia ETFs, which had a rough start to the year and were
trading in double-digit losses, are seeing things turn around in
their favor. Like many other emerging markets, Colombia was also a
victim of Fed taper and faced rough trading in 2013.
Last year, the economy grew by 3.7% -- the slowest pace since 2009.
Moreover, a strengthening currency (peso) had adversely hit the
country's manufacturing and agricultural sector causing falling
output levels and wages.
However, things have started to brighten for this Latin American
nation. Even though the country's full year 2013 GDP was
disappointing, Colombia's economy grew at the rate of 4.9% year
over year during the fourth quarter of 2013. This growth rate is
faster than many other Latin American nations, including Chile,
Mexico and Brazil (read:
Is the Mexico ETF a Better Play on Latin
Also, the country's monetary policies are closely aligned to keep
the annual inflation rate near the 3% target. Though Colombia
recorded an inflation rate of 2.51% last month, the central bank
expects inflation to reach an annual rate of 3% with an improving
In fact, the central bank has kept interest rates unchanged at a
record low of 3.25% for the past 12 months and has extended its
dollar buying program. The bank believes low rates will boost
spending within the economy and thereby enhance the country's GDP
Along with a supportive monetary policy, the country's fiscal
policies are also aiming to bolster growth. The government is
ramping up its infrastructure program and also focusing more on key
areas including mining, education and technological innovation.
Moreover, the recently signed free trade agreement with the U.S.
has spread optimism among investors as it is expected to create new
Indeed the country is witnessing a falling unemployment level and
an improving trade balance. The unemployment rate fell to 10.68% in
February from an 11.1% in January (read:
The Comprehensive Guide to Colombia ETFs
These improving macroeconomic trends along with an emerging
middle-class economy made Colombian ETFs witness a smart rally over
the past one month.
Three Colombian pure plays -
InterBolsa FTSE Colombia 20 ETF
Market Vectors Colombia ETF
iShares MSCI Colombia Capped ETF
) - have all gained in the range of 10% to 16% over the past one
Most of these gains have come in the past 15 days alone. GXG,
COLX, and ICOL have gained around 7.9%, 8.4% and 9.2% in the past
two weeks, suggesting a very strong rally as of late (see all
Latin American Equity ETFs here
The Colombian markets seem to have heaved a sigh of relief on the
back of improving economic fundamentals. The rally might
continue for sometime, if the nation continues to divulge
For 2014, the economy is expected to grow in the range of 4%-4.5%.
Strong domestic demand and consumption along with foreign direct
investment are expected to be the primary factors for lifting the
Moreover, the strengthening U.S. and Euro economy is expected to
support the country's struggling export sector. The Colombian
economy is a major exporter of commodities from the energy sector
(oil, coal, natural gas) to the agricultural sector (coffee) while
U.S. and Europe are the two largest trading partners of Colombia
Will Coffee ETFs Continue to Brew Returns in
Given the prospects of further gains, the above three ETFs could be
kept on investors' radar as the clearly have proven to be solid
choices for the Latin America market, at least in the short term.
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MKT VEC-COLUMB (COLX): ETF Research Reports
GLBL-X/F COL 20 (GXG): ETF Research Reports
ISHARS-MSCI CC (ICOL): ETF Research Reports
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