Chilean Stocks: Can the Rally Continue Amidst Election Uncertainty?
A staggering 40% surge year-to-date has Chilean investors asking a critical question: how much further can the IPSA climb? While record copper prices, anticipated political shifts, and the resolution of post-pandemic economic imbalances paint an optimistic picture, analysts caution that selective investment is now paramount. The Chilean stock market, while attractive, is no longer the bargain it once was, according to Credicorp, which projects the IPSA to reach 10,400 points in 2024 – a potential 13% return – but stresses the pivotal role of upcoming parliamentary elections.
Beyond the Headline Numbers: Sector-Specific Opportunities
The broad market gains mask varying degrees of opportunity. Several stocks, despite the overall rally, still present compelling upside potential. Here’s a breakdown of companies catching the eye of leading brokerages.
Cencosud: Argentina as a Catalyst
Retail giant Cencosud is highlighted by BICE Inversiones with a potential 39.6% increase over the next twelve months. This optimism stems from a perceived “turning point” in Argentina, where sales are outpacing food inflation, coupled with improvements in its US operations. Strategic asset sales in Brazil and Colombia are also expected to boost profitability. BTG Pactual echoes this sentiment, forecasting a 16% appreciation, citing anticipated margin improvements as Argentina stabilizes and efficiency gains materialize across its regional footprint.
SMU: Supermarket Expansion Fuels Growth
Despite a more modest 4.5% rise this year, supermarket chain SMU (Unimarc) is poised for significant growth. BICE Inversiones projects a 32.9% increase, bolstered by a 4.1% dividend yield. Credicorp anticipates a 27.3% rise, driven by an ambitious expansion plan – 115 new stores by 2029 – positioning SMU to compete aggressively with Walmart and consolidate its market share. This expansion is a key differentiator, demonstrating a long-term commitment to growth even amidst potentially weaker consumer spending.
Latam Airlines: Soaring on Resilient Demand
Latam Airlines has defied expectations, climbing 66% this year even after selling off significant share packages following its exit from Chapter 11. BICE Inversiones sees a further 33% upside, fueled by capacity growth and discounted valuations. While Credicorp is slightly more conservative, projecting a 16.1% increase, they point to stronger-than-expected demand for air travel. Latam’s projected revenues exceeding $15 billion in 2026, coupled with a significantly improved debt/EBITDA ratio of 1.1x, underscore its recovery and potential.
Andina-B: Brazilian Consumption and Dividend Appeal
The Coca-Cola bottler, Andina-B, remains a market favorite, benefiting from robust consumer spending in Brazil and Argentina. Banchile recommends the stock with a 12.5% potential increase, citing strong third-quarter results – a 10.1% revenue increase and a 16.1% jump in EBITDA. Credicorp adds that the company’s attractive dividend yield, potentially reaching 5% over the next eight months, further enhances its appeal. EBITDA is projected to rise 6.5% in 2026, reaching $652,899 million.
BCI: US Expansion and Domestic Strength
Banco BCI, up 67% this year, continues to show promise. Credicorp forecasts a 21.6% increase, driven by strong performance in Chile (an ROAE near 18%) and a successful restructuring of its US operations (CNB), which now boasts an ROAE of 10% compared to 3.7% in 2024. A pro-market outcome in the upcoming elections would likely further benefit the banking sector, potentially positioning BCI as a standout performer given its current valuations relative to competitors like Santander and Banco de Chile.
The Political Factor: Elections as a Key Catalyst
The shadow of the upcoming parliamentary elections looms large. A shift towards a more market-friendly government could unlock further potential across various sectors, particularly banking. However, uncertainty remains, and investors should carefully consider the potential implications of different electoral outcomes. Understanding the nuances of Chilean politics is crucial for navigating the market effectively.
The current rally in Chilean stocks is built on a foundation of improving economic fundamentals and positive sentiment. However, sustained growth will depend on navigating political uncertainties and identifying companies poised to capitalize on specific regional opportunities. Diversification and a selective approach are key to maximizing returns in this evolving landscape.
What are your predictions for the Chilean stock market in the wake of the upcoming elections? Share your thoughts in the comments below!
