Colombia ETF Could Pose Opportunity

August 15, 2010

As investors continue to be fearful of a double-dip recession or a lost decade in the US, Latin America, in particularly Colombia, and its exchange traded funds (ETFs) have reaped the benefits. 

So far in 2010, the Bolsa de Valores de Colombia has surged more than 35% and the nation’s GDP has grown by nearly 5%.  A major reason Colombia has seen such growth and prosperity, and is likely to continue to do so, is its supply of natural resources that the world demands.  The Latin American nation is rich in oil, coal and gold, which are amongst the nation’s largest exports and account for nearly 13% of its GDP.  What further boost appeal for Latin America’s third most populous nation is that all three of these commodities are likely to remain in high demand in the coming years.

A second reason Colombia’s economy is expected to witness, or at the very least sustain this growth, is that political instability in the region has started to ease.  It appears the Colombian government is in complete control of their nation and threats of violence or a political uprising by the Revolutionary Armed Forces of Colombia (FARC) are no longer prevalent with a new President in office.  This increase in political stability has resulted in a decline in violence, has opened up Colombia to international investment and has boosted domestic consumer spending. 

Lastly, it seems like Colombia’s central bank has things under control.  The nation’s 12-month running inflation rate is nearly 2% and it is highly likely that the central bank will be able to maintain its current benchmark lending rate of 3%. 

An easy way to gain access to Colombia is through the Global X/InterBolsa FTSE Colombia 20 ETF (GXG), which is heavily weighted in financials and energy.  Its top holdings include oil and gas exploration company Ecopetrol (EC), financial services firm BanColombia (CIB) and energy company Pacific Rubiales Energy. 

Disclosure: No Positions

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About etftutor
Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net, where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton. He is contributing author on The Street - his articles can also be found published on various sites including Yahoo! Finance, The Globe and Mail , Daily Markets, MSN Money, Seeking Alpha, Fidelity Investments, Traders Library, and Minyanville. Prior to this, Mr. Grewal was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds

One Response to Colombia ETF Could Pose Opportunity

  1. Nikolai says:

    I was in Colombia for a month last winter and I am absolutely convinced this country is ready to take off. No sign of problems from Bogota to Medellin, I was completely shocked.

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