ILF - ILF: Focus On Latin America With A 5% Yield

2024-05-03 20:57:17 ET

Summary

• The iShares Latin America 40 ETF (ILF) is an equities exchange traded fund focused on large capitalization Latin America companies.
• ILF is overweight Brazil and Mexico equities (over 80% of the fund), with financials and materials as the largest sectors.
• Mexico is benefiting from tensions with China and is experiencing a secular change in fortunes, leading to a stronger currency and an outperforming equity market.
• ILF provides diversification away from China-heavy emerging market ETFs, and trades at a low P/E ratio of 8x.
• The fund offers a high dividend yield of 5% when compared to other emerging market ETFs.

Thesis

Latin America is becoming interesting as the local governments are beginning to cut interest rates. After Brazil reduced its interest rate again in March 2024, Colombia followed suit by cutting rates on April 30, 2024. Monetary loosening is usually accompanied by a buoyant equity market, although regional factors also play a large role in overall equity performance....

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