Perseverance. success. Foundations of the Chilean Capital Markets Chile Day London, June 2017

Transcription

1 Perseverance Persistence in doingsomething despite difficulty ordelayin achieving success Foundations of the Chilean Capital Markets Chile Day London, June 2017

2 Agenda I. Macro Context I. Chile within Latin America II. Economy III. Institutions IV. Social development II. Capital Markets I. Availability of Capital II. Demand for Capital III. Intermediaries III. Where Chile stands Agenda

3 Brazil and Mexico are natural candidates to be international financial centers due to their size, leaving space for an Andean Financial Center Population (Mn) Brazil Mexico Andeans Nominal GDP 2016 USD billion 1,799 1,046 1,270 Equity Market Cap USD billion Equity Market Cap % GDP Bond Market Outstanding 1, Argentina +Chile + Colombia + Peru Source:, WEF, Heritage Foundation, World Bank, IMF, Central banks and statistic institutes, S&P 3

4 Chile is already a very open economy where International trade drives a significant portion of economic activity 50 International trade % of GDP 40 Imports Exports Chile Peru Colombia Argentina Source: IMF DOTS (Direction of Trade Statistics) 4

5 And the service sector exports a larger share of GDP than its Andean partners 60% Goods 12% Services 50% Imports (% of GDP) Exports (% of GDP) 10% Imports (% of GDP) Exports (% of GDP) 40% 8% 30% 6% 20% 4% 10% 2% 0% Chile Peru Colombia Argentina 0% Chile Argentina Colombia Source: ECLAC 5

6 Chile shows strong fiscal discipline given Structural Fiscal Balance Rule hopefully this does not change anytime soon 550 CDS Bps Current Account 450 % GDP Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 8,000 7,000 6,000 5,000 4,000 Argentina CDS Bps Chile Peru Colombia Argentina 3,000 2,000 1,000 0 Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun Source: IMF, Bloomberg 6

7 Chile s Net Debt Position has been deteriorating as the fiscal situation worsened, but is still very low Net Debt % of GDP 10 8 Fiscal Deficit % of GDP E E *Gross Debt for Argentina Chile Peru Colombia Argentina Source: IMF 7

8 Historical improvement in Sovereign Credit Rating at risk but still the best of the pack AA S&P Credit Rating evolution Foreign Currency Long Term Debt A+ Investment t Grade A- BBB BB+ Junk Bonds BB- B CCC+ * Current 7 Source: S&P Global Ratings *Selective Default for Argentina Long Term Debt in

9 GDP Growth slowing down from an already lower rate compared with Colombia and Perú CAGR 15 years GDP Growth % CAGR 5 years Chile Colombia Peru Argentina Source: IMF 9

10 Price stability is still a staple of the Chilean Economy based on a very strong Central Bank independence Inflation % CAGR 15 year 20.6 CAGR 5 year Chile Colombia Peru Argentina Source: IMF 10

11 Other measures of institutional strength also show Chile in a leading position among its Andean partners even though momentum is weak Global Competitiveness Index Score (1-7) Economic Freedom Score (0-100) Chile Peru Colombia Argentina Source: WEF, Heritage Foundation 11

12 Institutional strength weakening but still solid 75 Doing Business Score (0-100) 8 Transparency International Index Score (1-10) Chile Peru Colombia Argentina Source: World Bank, Transparency International 12

13 In terms of Human capital, two sides of a coin 35% 30% 25% 20% 15% 10% 5% 0% Latin America Top 20 MBA % of universities in the ranking Chile Colombia Argentina Peru CFA Program Charterholders Candidates Argentina Chile Peru Colombia Labor Market Flexibility i i Doing Business Ranking Quartile Colombia Chile Peru Argentina Out of 138 countries Source: WEF, AméricaEconomía Intelligence, CFA Institute 13

14 Chile stands as the strongest of pack in terms of Sustainability Country sustainability ranking Score (1-10) 10) Environmental Social Governance Chile Argentina Peru Q2 Q3 Q3 Colombia Q Source: Robeco 14

15 Still lots to do in terms of Reputation / Brand Recognition Favorable opinion of the country % of favorable answers Nation Brand Index GfK Peru Argentina Ranking Argentina 25 Chile 35 Chile Peru 37 Colombia Colombia Survey based on responses of 1,017 people in the United States Out of 50 countries Measures the power and quality of each country s brand image Source: Marca Chile, GfK 15

16 Availability of Capital managed by instituional investors is signifcant in absolute and relative terms 350 USD 322 bn USD 109 bn USD 61 bn USD 123 bn* 130% 39% 31% 23% % of GDP USD billio on * 50 0 Chile Colombia Peru Argentina Pension Funds Life Insurance Companies Mutual Funds Investment Funds Single Family Offices Multi Family Offices * Does not include Tax Amnesty Capital of app. USD 120 bn Source: SAFP, SVS, SBS, SFC & Compass Group Data as of December

17 Pension Funds continue to provide one of the largest institutionally managed savings pool in the region Total AUM International Investments billion USD USD billion Apr-17 Chile Colombia Peru Argentina Apr-17 Chile Colombia Peru Argentina Source: SAFP, SVS, SBS, SFC, SAFJP, ANSES & Compass Group Data as of December

18 And Life Insurance Companies have grown significantly, enriching the diversity of the eco system as the reserves are mostly invested in LDI Total AUM Evolution International Investments Evolution USD billion USD billion Mar Mar-17 Chile Colombia Peru Chile Colombia Peru Source: SAFP, SVS, SBS, SFC & Compass Group Data as of March

19 International diversification of institutional portfolios has trebled in the last decade USD billio on Chile Colombia Peru Argentina Chile Colombia Peru Argentina Equity Fixed Income Alternative Investments Others Source: SAFP, SVS, SBS, SFC & Compass Group Data as of December

20 The domestic mutual fund industry has also grown significantly 60 Total AUM Evolution lion USD bil Mar- 17 Chile Colombia Peru Argentina Source: SAFP, SVS, SBS, SFC & Compass Group Data as of March

21 Chile s Equity Market is relatively large and diversified Equity Market Chile Argentina Colombia Peru Number of listed companies Market Capitalization USD, billion % of GDP % of top 5 companies Average Daily Traded Volume YTD 2017 USD million % of top 5 companies Source: World Exchanges, countries central banks, stock exchanges, financial regulators and finance ministries, Compass Group 21

22 And sector diversification is higher 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Chile Argentina Colombia Peru Utilities Financials Consumer Staples Industrials Materials Consumer Discretionary Energy Real State Telecom Health Care IT Source: Bloomberg, sectorial composition according to GICS 22

23 Demand for Capital Fixed Income Market Fixed Income Market Chile Argentina Colombia Peru Bond Market Issuers Bond Market Outstanding USD billion International Corporate Bonds Corporate Bonds Bank Bond Government

24 Chile s banking system is large, well capitalized and diversified % 49% 37% 13% % of GDP 200 llion USD bi Chile Colombia Peru Argentina Corporate Personal Mortgages g Source: SBIF, ASBANC, SFC, BCRA 24

25 Diversity of Chile s intermediary Ecosystem is higher than its partners Chile Colombia Peru Argentina Number of Number of Number of Number of Concentration* Concentration* Concentration* Concentration* participants participants participants participants AFP's 6 73% 4 92% 4 97% 1 100% Life Insurance Companies 36 46% 19 49% 13 64% 20 Mutual Funds 44 38% 40 48% 8 81% 40 33% Single Family Offices Banks 20 50% 25 64% 16 71% 20 31% *% of total AUM held by the 3 largest entities Source: SAFP, SVS, SBS, SFC & Compass Group Data as of June

26 Where Chile stands (1 best, 3 worst) Macro Context t Argentina Chile Colombia Peru Size Global integration Economic policy Institutions Human capital Country brand Capital Market Size & Depth Capital Availability Demand for Capital Intermediaries AVG. RANK Rank levels: 1: High 2: Medium 3: Low 26

27 Small, prosperous financial centers are not necessarily unequal 130,000 GDP per capita (current US$), LHS 110,000 Gini Index (reverse scale), RHS Chile vs Small Financial Centers , , ,000 30, ,000 Chile Hong Kong* Ireland Luxembourg Singapore* Switzerland 60 * Data of GiniCoefficient for Hong Kong and Singapore corresponds to 2011 Source: IMF, World Bank 27