Chilean stock market hits 3 year high, what the hell?

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Donnybrook
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Re: Chilean stock market hits 3 year high, what the hell?

Postby Donnybrook » Sun Nov 06, 2016 11:56 am

I have been a long time resident of both Perú and Chile and have always found relations across economic lines to flow more easily in Perú. That does not mean that the job market is easier for anyone not in the ABC group in either country. However, this does seem to be slowly changing in both countries as skills become more important than surnames. Companies need the skills and cannot afford a decorative surname as an option for employment. The real problem is making those skills available to all.

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Re: Chilean stock market hits 3 year high, what the hell?

Postby HybridAmbassador » Sun Nov 06, 2016 5:18 pm

admin wrote:Na i definetly have my suspicions about peru. Based on what i seen like 15 years ago when i was there, it really had that feal of a country that the class divide will always keep it from reaching it's full potential.

I got way more interest in colombia and where it is going.

Overall i am looking for 10 to 20 year investments in the EM, in countries that are overall on the right trajectory or a sustainable growth trajectory, while trying avoid the countries that cycle through mega booms and busts.

I guess i would put it another way. Once you have seen a proper sampling of developing countries you sort of get a feal for what is real development, countries really making a breakout, and what is political b.s. or hedge fund hype that will implode. Much of that really i think is a cultural thing, more than pure economic thing.

Na i definetly have my suspicions about peru. Based on what i seen like 15 years ago when i was there, it really had that feal of a country that the class divide will always keep it from reaching it's full potential.

Admin, that was 15 years ago. Now days, Peru has got some more potential, it is closing in GDP to Chile's somewhat stellar GDP. Chile's 2015 was roughly about US$241 billion. Then Peru's was close to US$200 billion. Chile's buying power er population is 17.+ millions but the Peruanos has 30 plus millions. Many investors considering Peru's potential much better than Chile's..?
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Re: Chilean stock market hits 3 year high, what the hell?

Postby HybridAmbassador » Sun Nov 06, 2016 5:26 pm

The new head honcho of Peru, former US citizen, German Jewish descent and very savvy, worked in UN as economist and then some more..

The 77-year-old Pedro Pablo Kuczynski’s win over Keiko Fujimori, the leader of the strongest political party in the country, the Fuerza Popular (FP), came mainly thanks to the anti-vote against Fujimori. Ironically, he will have to rely on the support of her party to push forward his reforms. While the Kuczynski program could fix many issues of the Peruvian economy, he will ultimately have to revive the extractive sector.

Despite China’s economic slowdown and US monetary tightening, Peru was able to absorb these external shocks much better than other regional countries. Thanks to its large foreign currency reserves of about USD 60bn accumulated from its peak of metals exports, the country was able to limit the Peruvian sol’s depreciation and inflation.

One of the unsurprising changes is an overall decrease of the tax burden, resulting from a 3% cut of the sales tax. Peru has an ineffective tax system, rampant tax evasion, and decreasing tax revenue which shortens its GDP by an estimated 9%. Previous governments could somewhat ignore this fact thanks to the income from commodity exports.

Kuczynski wants to compensate for lower taxes by making tax collection more effective and formalising the large informal sector, that includes 64% of the labour force. The goal is to incentivise small and medium-sized businesses (SMEs) to make their operations legal in exchange for tax amnesty. This, by the campaign’s own estimates, could formalise up to 1.5 million jobs and bring in more tax revenue.

Such initiatives could help tremendously, however they are complex and will take time. So another plan of the administration is to increase the budget deficit ceiling from 2 to 3 percent to boost public spending and stimulate the economy.

However, with the deficit expected to reach 3% in 2016 anyway, there is not much room to work with. Ultimately, Kuczynski will have to rely on a recovery of the extractive industry, something he, as a former mining minister and World Banks mining expert, knows very well.

Peru’s extractive sector is complex and despite its partial recovery the inherent problems remain the same. Months-long unrest, road blockades and deadly protests over the environmental impact and lack of basic social services chronically erupt across rural resource-rich regions. The exploitation of these very same areas helped to create the Peruvian economic miracle; however, most of the riches were centralised in Lima.

Consequently, unrest in the impoverished, but resource-rich regions, combine with complicated regulations, tax codes, and the system of mining permits. This combination has, at times, led to a downturn in commodity prices in Peru’s extractive sector . No one is expecting commodity prices to return to its bonanza of the early 2000s, but efficiency can make up for it.
Future of Kuczynski reforms

Kuczynski’s administration wants to set clear environmental standards and creating a functional political space. This space, in turn, would result in a dialogue between local communities and government officials in order to limit chronic turmoil in rural areas. Furthermore, his reforms would ensure the funds from mining, now handled only on the provincial level, would be directly spent on projects at local communities where extractive projects take place.

A flexibility of the regulatory framework and of bureaucracy over issuing mining permits could unlock the USD 20bn of unrealised mining projects and bring in much more in the long term.

The main issue is the political viability of these reforms. Kuczynski won’t be able to pass anything without at least a partial support of Fujimori’s FP, who holds 73 seats out of the 130 in the Congress. Kuczynski’s Peruanos Por el Kambio party has 18 and has so far only received the support of a smaller leftist APRA party. His announcement to include both FP and main leftist Frente Amplio party in his cabinet, accompanied by an apology to his election rival for the heated political exchanges during the campaign haven’t been answered yet.

The promised increase of the minimum wage to 850 Peruvian sols on the first day in the office might help PPK with the leftist parties which could object to the tax amnesty or proposed severance pay cuts. His pro-market reforms could, in turn, be favoured by at least some parts of the FP. However, the conservative party will try to dominate his government in order to make a statement early on and force PPK to make many concessions.

What offers another chance for the government is a possible internal split in the FP between Keiko Fujimori and her brother Kenji, who did not vote for her and plans to run for the presidency in 2021. What is certain, however, is that Kuczynski will have to rely on the two strongest political entities in Peru – the Fujimorismo and anti-Fujimorismo – a difficult, but not impossible task. A political paralysis would continue to impede another Peruvian Miracle and could see deepening fiscal deficit and further mediocre economic performance.
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Re: Chilean stock market hits 3 year high, what the hell?

Postby admin » Fri Nov 11, 2016 11:13 am

Well, Trump seems to be good for copper prices:

http://www.wsj.com/articles/china-and-t ... 1478824724
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Re: Chilean stock market hits 3 year high, what the hell?

Postby admin » Fri Nov 11, 2016 11:17 am

even stranger, the peso / dollar has hardly budged, while other latin american currency like mexico and Brazil seem to be getting hammered:
$656,36

Chile, the new safe-haven?
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Re: Chilean stock market hits 3 year high, what the hell?

Postby papageno » Fri Nov 11, 2016 11:47 am

Copper has been moving up steadily, perhaps that's why? This AM I got 650/1 at Banco Santander.

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Re: Chilean stock market hits 3 year high, what the hell?

Postby eeuunikkeiexpat » Fri Nov 11, 2016 12:48 pm

665 pop, damn should have waited to withdraw :(
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Re: Chilean stock market hits 3 year high, what the hell?

Postby gregf » Fri Nov 11, 2016 1:12 pm

Thats a nice bump.

What the consensus on real estate by the way? Is there a bubble? Dept sales in el oriente are down like ~50% year over year? I've held off trying to buy since prices started their crazy surge upwards several years ago and am shocked that they've gone as high as they have. How ordinary Chileans can afford a 500,000 USD 3 bedroom with 100m utilizable I have no idea?

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Re: Chilean stock market hits 3 year high, what the hell?

Postby papageno » Fri Nov 11, 2016 1:14 pm

Emol now shows 668.40, how many times does it change during a day?
And, ZeroHedge says Chinese speculation is what's driving up copper prices.

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Re: Chilean stock market hits 3 year high, what the hell?

Postby Britkid » Fri Nov 11, 2016 1:55 pm

Around where I live some people buy a piece of land and then do nothing with it. You see them poking about now and then and standing there and pointing when they visit their land with the vague idea that they might build a house on it, and that goes on for a year or two and nothing happens.
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Re: Chilean stock market hits 3 year high, what the hell?

Postby admin » Mon Nov 21, 2016 10:26 am

any guesses as to what the hell is going on?

I am showing the ipsa up almost 7% this morning. That has got to be a data glitch. I see some action in the individual components, but nothing that is moving that much. It is like flash rally, as opposed to a flash crash.
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Re: Chilean stock market hits 3 year high, what the hell?

Postby admin » Mon Nov 21, 2016 10:55 am

I can find no explanation for this
http://www.bolsadesantiago.com/GAT/char ... co_CIQ.asp

It broke above 7%
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