Chile Equity Strategy & Top Picks: 12-month Outlook

Research evidence excerpt

Chile Equity Strategy & Top Picks: 12-month Outlook

Chile Strategy & Top Picks

Upgrading IPSA on valuation discount and growth prospects

• We are increasing our 12-month IPSA target from 11,200 to • We do not expect pension funds to repeat strong 2025 inflows as

13,000 points on both valuation multiples re-rating and higher their exposure to local equities (9.7% as of May-26) is close to its

earnings prospects. last 10 years maximum. Nevertheless, we could expect additional

from a) mutual funds net inflows as i) local equity exposure is

• Chile’s economy is gradually transitioning to a higher growth relatively low (4.5% AUM), and ii) local stock market should have a

environment in 2027. Investment is expected to be one of the positive performance, and from b) foreign investors attracted by

drivers of growth. Inflationary pressures are moderate; however, valuation discounts and a more constructive economic growth

rate cuts remain off the table for now. The Reconstruction Law environment.

currently under discussion in the Senate is at the center of the

government’s economic agenda. Its various measures, focused on • IPSA is trading with an attractive discount. Markets with limited

attracting investment, aim to increase trend growth from the technology exposure and high dependence on oil imports have

current 2% to 3%. lagged their peers. Chile owns both. Chile’s 11.0x forward P/E

represents, compared to other geographies, one of the highest

• We are incorporating a more constructive view on medium-term discounts to its own history (-18%). This discount is only like

local economic growth prospects which increases our target P/E Brazil’s (-19%), wider to LatAm’s (-14%) and much higher than

forward from 13.2x to 14.0x. Additionally, our EPS estimates Emerging’s (-7%).