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Chile’s ‘Pinera’ Stock Rally Is Over, Top Fund Says (Update1)
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By James Attwood

Jan. 15 (Bloomberg) -- Chile’s region-beating equity rally fueled by prospects that billionaire investor Sebastian Pinera will become president is probably over, said the country’s best- performing fund manager in the last year.

Chile’s main stock index, the Ipsa, gained 9.5 percent and reached a record since Pinera won a first-round election on Dec. 13. The MSCI EM Latin America Index rose 0.2 percent. Even if Pinera wins this weekend’s runoff ballot against government candidate Senator Eduardo Frei investors may decide to sell stocks, Francisco Busquet, head of Latin American investments at Larrain Vial SA, said by telephone today.

“The typical ‘buy the rumor sell the fact’ exists here,” said Busquet, whose Multimercado mutual fund is the best- performing Chile-domiciled fund in the last year. “If he wins, it shouldn’t keep rising. It’s more likely to correct.”

Harvard University-educated Pinera vows to increase investment and create 1 million jobs by awarding concessions to build infrastructure such as schools, cutting taxes for small businesses and making government more efficient.

A victory by Christian Democrat Frei would give investors more reason to sell stocks and may spur a two- or three-day correction depending on global events next week, Busquet said.

The winner is unlikely to steer Latin America’s most stable economy away from the free-market policies that won it membership last month in the Paris-based Organization for Economic Cooperation and Development.

The underlying support for Chilean equities remains the economy’s nascent recovery from its deepest recession in a decade, Busquet said.

Larrain Vial added Chilean banking and retail stocks to its holdings in December amid signs of rebounding spending and construction, he said.

To contact the reporter on this story: James Attwood in Santiago at [e-mail]
Last Updated: January 15, 2010 15:36 EST