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Chile Stocks May Gain on Slower Inflation: JPMorgan

By James Attwood and Nathan Gill
     Sept. 23, 2008  (Bloomberg) -- Chile, the best-performing Latin American stock market this year, probably will remain a relative safe haven and may benefit from easing inflation, JPMorgan Chase & Co. said.
     Chile's Ipsa index has fallen 10 percent this year, about half the decline of Brazil's Bovespa. The stock market's ``defensive'' characteristics are supported by Chile's stable politics and economy, developed capital markets and ``substantial'' reserves, strategists including Brian Chase wrote in a note to clients dated yesterday.
     Chilean stocks are now trading at ``more attractive valuations'' and may get a boost from a potential easing of inflation on lower commodity prices and the prospect for pension funds to increase domestic holdings, they wrote. They recommended easy-to-trade ``defensive'' companies such as Enersis SA, Banco Santander SA, Cia. Cervecerias Unidas SA and Banco de Chile.
     ``We believe these names are likely to move first on a gradual pickup in sentiment,'' the strategists wrote.
     Chile's economy is ``very well positioned'' to handle global financial turmoil, Matthew Hickman, who helps manage $9.5 billion in emerging-markets stock at Credit Suisse Asset Management, told reporters in Santiago today.
     Chile has made ``tremendous strides in the last 20 or 30 years in insulating itself and protecting itself against the vagaries of international capital flows, so from a macroeconomic view, in terms of reserves, in terms of fiscal account, we're in a much better position,'' Hickman said. ``Secondly, Chile has been able to reduce its dependence on copper.''

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