Chile has long been the economic model for Latin America and maintains the highest credit ratings with Aa3 from Moody's and A+ from Standard & Poor's and Fitch. Despite a strong economy, the equity market suffered one of the largest losses in the region, with a 24% loss since January. What will 2012 bring?
The government has carried a relatively large fiscal surplus in the past, but may turn to stimulus measures in the first half of 2012. Though the move would have an economic rationale, it would also help to ease the decline in approval ratings of the administration ahead of the October municipal elections and next year's general election.
Meanwhile, Chile's losses have been more a result of profit-taking than changing growth perspectives -- the market has significantly outperformed others in the region over the last five years.
In light of continued economic strength and the increased probability for stimulus, investors may want to take advantage of lowered valuations with an overweight relative to other countries in the region.
CIA Cervecerias Unidas ( CCU , quote ), a consumer beverage company, held up well over the last year with an increase of about 8% versus losses in the general market.
Banco de Chile ( BCH , quote ) was the relative standout among financials with a loss of only 10% versus losses in excess of 20% for the rest of the sector.
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