Van Eck Introduces Colombia ETF
Source: Index Universe, Cinthia Murphy (3/15/11)
"Colombia, underweighted by most investors, has a very favorable outlook."
The Market Vectors Colombia ETF will go head to head with Global X's two-year-old $133M Global X FTSE Colombia 20 ETF, but COLX will be the cheaper of the two funds. COLX has an annual expense ratio of 0.75% compared to GXG's recently lowered net ratio of 0.78%.
The launch of COLX is the latest chapter in a budding rivalry between the two New-York based ETF providers. Among other overlapping strategies, Van Eck also has an ETF in registration with the SEC that will canvass the South America's Andean region. Global X brought an Andean fund to market last month focused on Colombia, Chile and Peru through its Global X FTSE Andean 40 ETF.
Colombia, in particular, has benefitted from strong commodities price trends, solid exports and better access to credit in recent years, thanks to government policies that have opened up the country to foreign investment and allowed it to realize strong economic growth, said Van Eck Emerging Markets Analyst Ed Kuczma in a conference call on Tuesday.
Among what Kuczma calls the "catalysts for the Colombia economy" are debt reduction that has improved its debt rating globally; pending free-trade agreements with the U.S.; and a stock market integration plan that would bring the Colombian, Peruvian and Chilean markets together.
While inflation, a history of government-enforced capital controls and a hostile neighbor in Venezuela all challenge the country's otherwise rosy outlook, Kuczma said the timing for COLX is ideal.
"The pros outweigh the cons," Kuczma said, "Colombia is underweighted by most investors but the country has a very favorable outlook."