Latin America Equities Category Report
Last modified: March 20, 2012
The Latin America Equities ETFdb Category contains 19 ETFs with a total market capitalization of approximately $16.14 billion (as of March 20, 2012)
The following are the three largest ETFs in this ETFdb Category by market capitalization (as of March 20, 2012):
| Ticker | ETF | Market Cap |
|---|---|---|
| EWZ | iShares MSCI Brazil Index Fund | $10.32 billion |
| ILF | iShares Latin America 40 Index Fund | $2.16 billion |
| EWW | iShares MSCI Mexico Index Fund | $1.20 billion |
View all ETFs in this ETFdb Category
The Latin America Equities ETFdb Category includes funds holding equities of Latin American companies, including funds holding companies of various sizes (small-, mid-, and large-cap funds) and styles (value and growth funds). ETFs in this ETFdb Category include both diversified Latin American funds (i.e., ETFs offering exposure to multiple Latin American economies) and ETFs that invest exclusively in a single market. Countries covered include:
Key Indexes
Indexes tracked by ETFs in this ETFdb Category include:
- S&P Latin America BMI Index: Defines and measures the investable universe of publicly-traded companies domiciled in emerging Latin American markets. ETFs tracking this index include GML.
- S&P Latin America 40 Index: Comprised of selected equities trading on the exchanges of Mexico, Brazil, Argentina, and Chile. ETFs tracking this index include ILF.
- FTSE Colombia 20 Index: A market capitalization-weighted index of the 20 most liquid stocks in the Colombian market. ETFs tracking this index include GXG.
Trends to Watch
The prices of Latin American Equities ETFs are impacted by a wide variety of factors, including:
- Regional Stability: Latin America has historically been subject to political instability, military coups, and long stretches of violence that have derailed development efforts. These events are far less common today, although recent turmoil in Ecuador and continued policy clashes between the U.S. and Venezuelan governments highlight the impact that ongoing geopolitical tensions can have in the region.
- Commodity Prices: Many Latin American countries count commodities as a significant portion of their economies, including Venezuela (oil), Brazil (oil and agriculture), Peru (precious and industrial metals), Colombia (coffee), and Argentina (honey, soybeans, and wheat). Given the significant portion of the regional economy represented by this sector, commodity prices tend to have a spillover effect on the equity markets. As natural resource prices rise, equity markets will generally strengthen as well.
- Trade Regulations/Strength of Export Markets: Latin America counts the U.S. and Canada among its largest trading partners, and as such is somewhat dependent on the strength of the economies in these countries to drive its export market. Moreover, any restrictions on free trade imposed by these countries could have a significant impact on Latin American economies.
In addition, similar to U.S. equities, Latin American equities are impacted by changes in numerous country-specific economic indicators, including: (1) consumer expectations, (2) unemployment rates, (3) construction activity, (4) industrial production levels, (5) inflation, and (6) manufacturers’ orders.
Latin America Equities ETF Performance
Portfolio Role
Most diversified portfolios should maintain some exposure to Latin American equities, either through a diversified Emerging Markets ETF or through a region-specific fund. Latin America Equities ETFs can be used to round out equity exposure for portfolios comprised primarily of investments in domestic stocks and achieve some degree of geographic diversification.
ETFdb Rule of Thumb: Although individual investor circumstances ultimately determine an appropriate allocation, as a rule of thumb, Latin America Equities ETFs should make up less than 5% of a portfolio. Investors may also gain exposure to Latin American stocks through emerging market and global equity ETFs. For investors who are particularly bullish on Latin American equities markets, or who wish to minimize exposure to U.S. equity markets, this allocation percentage may be much higher.
Correlation Matrix
Latin America Equities ETFs generally maintain strong correlations with both U.S. and other international equities. Nevertheless, there are undoubtedly benefits of geographic diversification within a portfolio. Many Latin American countries are rich in natural resources, meaning that the correlation between this ETFdb Category and commodity prices may be strong.
ETFs to Watch
Three ETFs within this ETFdb Category recommended for investors looking to gain exposure to Latin American equities:
| Issuer | Fund Name | Ticker | Index Tracked | Analyst Note |
|---|---|---|---|---|
| iShares | MSCI Brazil Index Fund | EWZ | MSCI Brazil Index | One of the largest and most widely-traded ETFs, with average daily volume of more than 19 million shares |
| State Street | SPDR S&P Emerging Latin America ETF | GML | S&P Latin America BMI Index | Offers exposure emerging markets, including Brazil, Mexico, Chile, and Peru |
| Global X |
FTSE Colombia 20 ETF | GXG | FTSE Colombia 20 Index | Currently the only ETF offering U.S. investors exposure to the Colombian markets |
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Disclaimer
The information herein is not represented or warranted to be accurate, correct, complete, or timely. Past performance is no guarantee of future results. All investors should read applicable prospectuses before investing.
From time to time, the authors of this report or other employees of ETF Database may have a long or short position in securities referred to herein. The factual statements herein have been taken from sources we believe to be reliable, but such statements are made without any representation as to the accuracy or completeness or otherwise.
Report last updated by:
Michael E. Johnston
Senior Analyst
michael.johnston@etfdb.com
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