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Local market ETFs: the best way to save dollars by spreading risk

National Securities Commission (Reuters)
National Securities Commission (Reuters)

On Friday, January 7, 2022, CNV (National Securities Commission) announced the operation of 9 Cedears (Argentine Deposit Certificates) ETFs (Exchange Traded Funds, for short). Until then, Cedears shares could only be traded locally.

ETFs allow depositors to be exposed to a variety of liquid assets, such as indices, commodities, industries or emerging markets, giving lesser-known investors the opportunity to spread risk and avoid having to choose each company individually.

In Argentina, with a recurring inflationary economy and the depreciation of its currency, ETFs offer the added option of being able to sell capital in dollars.

In the first rounds, this investment tool was successfully implemented in the local market. The daily volume of variable income traded is $ 25 million (with a combination of 20% local equities and 80% Cedear), above the daily average of December 2021, which was $ 21 million, with a combination of 30% local equities and 70% Cedear) , when they were not yet on the market.

a variety of options

The largest ETF to date is the SPDR S&P 500, or “SPY AR,” depending on its exchange code. It consists of a portfolio of 500 stocks that make up the S&P 500 index. It mainly includes US companies with high market value and pays dividends on a quarterly basis.

The average value of this ETF to date is 450 million Argentine pesos. We believe that this is the best option to invest in US companies that are in a mature economic cycle and are therefore less likely to suffer from fluctuations.

For those investors seeking refuge from global inflation, we recommend the Energy Select Sector, or “XLE AR”. The holdings of this ETF are in large US companies that develop and produce crude oil and natural gas or provide services to companies in these industries.

We believe that in times of rising inflation, commodities, especially energy, serve as a haven of value. On average, this ETF listed liquid assets of 80 million pesos.

Otherwise, we believe that the US banking system could have better relative performance than other sectors. In this sense, and given that the US Federal Reserve seems closer to allowing interest rates to rise soon, financial institutions could find it easier to improve their profitability due to the larger difference between the interest rates they borrow and the ones they borrow. pay for deposits.

Due to the latter, we believe that the financial sector Select, or “XLF AR”, i.e. An ETF that includes financial services companies that trade from investment management to commercial banks or investment banking is a great option.

Finally, for those investors who want to invest outside the United States, and more specifically in emerging markets, iShares MSCI Brazil (“EWZ AR”) is the best choice. This tool expands the Brazilian stock market, investing in medium and high-value companies in South America’s largest economy.

Despite the fact that 2022 is an election year in the neighboring country, which means that we must be careful, we believe that the fundamentals of the country’s investments look attractive. This ETF has fallen by 36% in dollars since July 2021, but since the beginning of January this year it has been on the rise and has already recovered 22% of its value.

Finally, the introduction of this series of ETFs in the local market will enable depositors to take risks with the most developed countries, with the convenience of being able to integrate the investment in pesos. This is a good opportunity to try to give investors of all characteristics the opportunity to spread risk with the recommended minimum initial capital between $ 5,000- $ 10,000 pesos.

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