SANTIAGO: Chilean stocks and currency are poised to reach new heights in 2018, bolstered by the victory of conservative billionaire Sebastian Pinera in the country's presidential election this month and a sharp spike in copper prices, analysts say.
Chile's IPSA stock index has gained almost 34 percent so far this year and is on track to post its best performance since 2010. The peso has risen 6.5 percent from a low point the week before the Dec. 17 election, bidding at 614 pesos per dollar and settling at its strongest level in 2-1/2 years.
"With the political uncertainty behind us, the global context continues to favor a strengthening of emerging market currencies. Together with improved expectations for economic growth, the exchange rate will continue to strengthen in the next few months," Chilean bank Bci said in note.
Concerns ahead of the December election, which pitted a center-left candidate against Pinera, led to a sharp increase in demand for dollars in Chile, leading the central bank to approved measures to increase dollar liquidity in foreign exchange markets.
Immediately after Pinera's victory in the second-round run-off election, Chile's peso strengthened more than 2 percentage points against the dollar and the IPSA hit an all-time high, as investors bet on more business-friendly policies under a Pinera administration.
"The uncertainty disappeared after the second round," said Guillermo Araya, an analyst with brokerage firm Renta 4.
Pinera takes office on March 11. He has promised to double economic growth in the $250 million economy by cutting corporate taxes and slashing red tape in the world's top copper producer.
Analysts say the favorable macroeconomic and political winds could see the IPSA hit 6,500 points, a new record high, led by the banking and raw material sectors.
"Chile should once again see a significant premium (over other markets in Latin America)," said Francisco Soto, of brokerage firm Tanner Investments.
The price of copper held near a four-year high on Friday, lifted by worries about supply disruptions. The metal accounts for over half of export earnings and as much as 15 percent of gross domestic product in Chile, the world's top producer.
Analysts at Citi say there are over 30 labor contracts, covering around five million tonnes of mine supply, due to expire next year, most of them in Chile and Peru.
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