Ten Reasons to Invest in Chile

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After Brazil, Chile is the one of the attractive destination for overseas investors.  While Chile’s economy is primarily a commodity-based economy, there are many other factors that favor Chile.

From a recent report by OECD:
“Chile has managed the crisis better than other small open economies ,” said OECD Secretary-General Angel Gurría. “Thanks to sound fiscal policies and good monetary policy management during the boom years, there was room for decisive stimulus measures which are now proving their worth.”

The following are some of the reasons to invest in Chile:

  1. Chile is on its way to become the 31st member of OECD
  2. The economy is expected to grow 4.1% this year and 5.0% in 2011
  3. Chile has low debt
  4. In 2009, Chile was number 5 in the Economic Freedom of the World Report, ahead of the U.S.
  5. Corruption is very minimal
  6. Chile has a liberal capital market and stable financial system
  7. Follows free trade economic policies
  8. Last month, Sebastian Pinera, the country’s first democratically elected conservative leader in more than half a century was elected
  9. Chile is the largest producer of copper in the world
  10. The Total Government Expenditure is low

The easiest way to invest in Chile is via the iShares Chile ETF (ECH). Financials constitute under 10% in this ETF. The fund has an asset base of $380M and has 32 holdings. Another way to invest is to pick some of the Chilean ADRs trading in the US markets. The list of Chilean stocks can be found here.

11 Hi Dividend Yield, Hi Dividend Growth Rate Foreign Stocks

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When picking dividend stocks, in addition to an attractive dividend yield it is important to select stocks that have high annual dividend growth rate.These two factors will give a better picture about the stocks than going with just the yield alone.

The following foreign stocks satisfy the two conditions:

Dividend Yield = > 2%
Average Annual Dividend Growth Rate in the past 5 years = > 10%

1.Endesa-Empresa Nacional de Electricidad (EOC)
Chile
Current dividend yield: 2.23%
Average Annual Dividend Growth Rate: 36%

2.Enersis (ENI)
Chile
Current dividend yield: 2.24%
Average Annual Dividend Growth Rate: 14%

3.National Grid (NGG)
UK
Current dividend yield: 4.56%
Average Annual Dividend Growth Rate: 13%

4.Veolia Environnement (VE)
France
Current dividend yield: 5.15%
Average Annual Dividend Growth Rate: 17%

5.Bancolombia (CIB)
Colombia
Current dividend yield: 2.76%
Average Annual Dividend Growth Rate: 34%

6.Corpbanca (BCA)
Chile
Current dividend yield: 4.84%
Average Annual Dividend Growth Rate: 26%

7.Bank of Novo Scotia (BNS)
Canada
Current dividend yield: 4.16%
Average Annual Dividend Growth Rate: 12%

8.Bank of Montreal (BMO)
Canada
Current dividend yield: 5.13%
Average Annual Dividend Growth Rate: 12%

9.Royal Bank of Canada (RY)
Canada
Current dividend yield: 5.33%
Average Annual Dividend Growth Rate: 15%

10.City Telecom (CTEL)
Hong Kong
Current dividend yield: 7.56%
Average Annual Dividend Growth Rate: 16.12%

11.Portugal Telecom (PT)
Portugal
Current dividend yield: 7.34%
Average Annual Dividend Growth Rate: 27.60%

Note: Data noted above is believed to be accurate. Please do your own research before making any investment decisions.

China vs. USA – A Comparison of Government Finances and the Economy

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In this post lets take a look at some of the differences between China and USA. The chart below shows the comparison of government finances between the two countries.

Click to enlarge

Source: Der Speigel

China has the world’s largest foreign currency reserves. Though the chart says it is $1.9T, the more recent figure was $2.4 Trilllion at the end of December 2009.

The public debt as a percentage of GDP for the U.S.  is more than double that of China at about 38%.

China’s total external debt is just $400B. China is the creditor nation while the U.S. is the debtor nation. Currently the gross external debt of the U.S. is a whopping $13.75 Trillion. According to the U.S. Office of the Treasury the majority of this debt is in the form of long-term bonds and notes.

Clearly the U.S. has long ways to go before it can eliminate the public debts to low levels and be become a creditor nation again.

The services sector forms about 80% major part of the U.S. economy whereas in China it is just 40%. Since the majority of the U.S. manufacturing was off-shored to developing countries, this sector accounts for just 19% of the U.S. economy. In China manufacturing accounts for 49% of the economy. A significant portion of the service sector economy in the U.S. was based in the FIRE (Finance, Insurance and Real Estate) industries.Since the credit crisis, the financial and real estate sector have laid off thousands of workers and the industries are still in shaky grounds. For example, it may many years before a meaningful recovery takes place in the real estate industry.

One way for the U.S. to accelerate the economic recovery would be to invest heavily in the manufacturing sector and increase exports.

Related:

China vs. India: Economy and Government Finances

USA vs. UK: Government Finances and Size of Economy

List of Countries for Possible Downgrades

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From “The Numbers” section of the latest edition of Bloomberg BusinessWeek:

country-ratings.JPG

Governments around the world haven been borrowing heavily in the past 10 years so much that the debt level has now more than doubled to $55 Trillion.

CNBC has published a list of The World’s Biggest Debtor Nations based on the total outstanding external debt as a percentage of GDP. Greece ranks ahead of the U.S. at number 16.