iShares MSCI Chile ETF

ECH

Market cap $741M

Chilean equities have surged in 2025, but I recommend a HOLD on the iShares MSCI Chile ETF due to risk/reward concerns. The short-term economic outlook is stable, supported by copper demand and low political risk ahead of the November elections, but long-term growth remains weak. Valuations are fair versus historical averages, yet global risks—especially copper price sensitivity and US-China tensions—temper upside potential.

It has been 225 days since President Trump's Inauguration on January 20th, and the S&P 500 entered today up 8% since the last close before the Inauguration. Speaking of the G7, the US has been the worst market among these seven developed nations since Inauguration Day in January. Along with being the second-best performing country ETF since Inauguration Day, Vietnamhas easily been the best performer since April 8th with a gain of 77.5%.

I rate the iShares MSCI Chile ETF (ECH) a hold due to short-term headwinds and overvaluation versus regional peers. Chile's economy is heavily reliant on copper and lithium, both facing weak short-term outlooks despite long-term potential from the energy transition. ECH's concentrated portfolio and higher P/E ratio increase risk, while its dividend yield and diversification lag behind the iShares Latin America 40 ETF (ILF).

ECH offers attractive valuation and strong YTD momentum, but its concentrated, bank-heavy portfolio increases risk. Despite a compelling PEG ratio and solid long-term growth, recent dividend declines and high volatility warrant caution. Technical signals suggest a potential near-term pullback, even as the long-term trend remains bullish after a multi-year breakout.

Many ETFs that track foreign markets are up more than 20% this year.

The iShares MSCI Chile ETF offers potential for risk-seeking investors due to the possibility of a new government in upcoming elections. ECH is fundamentally attractive with a P/E ratio of 11.91, a book ratio of 1.27, and good liquidity, but it's highly concentrated in financials. Chile's economic outlook is neutral with 4% GDP growth, rising inflation, and unemployment, but a low debt/GDP ratio and trade surplus are positives.

Chile's economy is showing signs of recovery, with recent growth picking up, as highlighted by the World Bank's positive outlook. Despite economic improvements, Chile's Central Bank remains cautious and is still quarters away from considering rate cuts. Inflation peaked in 2022, but new mining investments, particularly in copper, are driving economic optimism.

Our emerging markets watchlist tracks nine indexes from emerging economies around the world. Emerging markets are countries with economies in the process of rapid growth and industrialization.

Chilean equities have underperformed due to uneven commodity prices and weakness in other LatAm markets such as Brazil. Despite recent setbacks, Chile's economy has shown resilience, and dramatic interest rate cuts should provide support in 2025. The ECH ETF offers diversified exposure across various sectors, making it a good way to get access to Chile's market.

US equities have outperformed the rest of the world for a long time now. While the US is up 58% on a total return basis during the current bull market, the rest of the world is up 13.5 percentage points less at +44.5%. Looking at the international dividend ETF over a longer time frame, over the last five years, it's up 20.6% in price and more than double that on a total return basis.