Chile Market Summary – September 7, 2012

Santiago Stock Exchange. Photo credit: Isaías Campbell

SANTIAGO — It was a good start for the month of September for global financial markets, where September traditionally has been negative, except in Chile. The IPSA, the Santiago Stock Exchange Index, was flat for the week, second week in a row, whereas the US’s Standard & Poor’s 500 was up about 2 percent hitting four-year highs and Germany’s DAX Index was up about 3 percent hitting a new high for the year.

On Thursday global markets spiked on news that Mario Draghi, head of the European Central Bank (ECB), was moving forward with a plan to purchase bonds from financially troubled governments such as Spain and Italy. The Dow Jones Industrial Average jumped 200 plus points on the news, about 1.5 percent, whereas the IPSA had a muted response, up about 10 points or about 0.2 percent.

What did really move this week Chilean related was copper, up almost 6 percent. Copper had closed last week Friday at $3.45 per pound and reached $3.65 in the week, with a $0.13 per pound increase just today. China’s announcement of a $185 billion infrastructure stimulus project drove today’s big move.

We saw the Peso gain strength, up approximately 1 percent for the week closing at about 475 to the US dollar. Not good news for Chilean exporters but an indication on how investors feel about the Chile’s financial stability.

Also the Aberdeen Chile Fund (CH, NYSE), a closed-end fund that invests in Chilean equities, jumped 4 percent for the week. A big contributor to the upside move was Banco Santander’s shares gaining 11.6 percent for the week. Santander makes up about 10 percent of CH’s holdings.