We opened a small tactical long Chilean equities on Wednesday (ETF ticker: ECH) on better valuations. We also speculate that elections that are still likely to lead to a win by centre-right Vamos coalition's Sebastian Pinera. Also, it's not often mentioned by press, but the worst outcome - a second-place finish by Beatriz Sanchez from the far left Frente Amplio - did not materialize and this should anchor expectations from the most dire of political scenarios. Faced with the choice of either a conservative govt or a status quo govt (under Alejandro Guillier from Nueva Mayoria coalition), leftists are unlikely to be turn out for the 17 Dec second-round elections, though this disenchantment is a long-term challenges that needs to be addressed by the next administration.
ECH ETF (black) vs IPSA stock index (blue), CLP (purple) and copper futures active (orange):
This recent read by Frontier Strategy Group suggests we may get a market-friendly outcome in the upcoming elections - even if the new govt's mandate/challenges are even greater than what markets widely assumed going into last weekend's first-round election.
- 1/ Sebastián Piñera has already received unconditional support from far-right candidate José Antonio Kast
- 2/ Anti-Piñera vote alone will not mobilize Frente Amplio voters
- 3/ Guillier has a more difficult balancing act to court voters