Colombia is set to outperform after passing the ‘Trump test,’ pros say
Colombia remains a favorite market for some strategists and fund managers, despite some geopolitical tensions with the U.S., thanks to the country’s value proposition and growing economy. U.S. President Donald Trump threatened on Sunday to impose immediate tariffs on the South American country because it turned back aircraft carrying deported migrants. After Colombia reached a deal with the U.S. on Monday to accept migrants, the White House retreated from its sanctions, averting a potential trade war. That geopolitical blip has not altered the bullish view of Yan Wang, chief emerging markets and China strategist at Alpine Macro. “The events over the weekend suggest that Colombia has effectively passed the ‘Trump test’ and I do not expect a significant deterioration in the bilateral relationship,” Wang told CNBC Pro on Jan. 27. The U.S. had a trade surplus of around $1.2 billion in goods with Colombia on a 12-month annualized basis as of Nov 2024, he said, quoting data from the U.S. Census Bureau. This indicates that Colombia “should be relatively insulated from Trump’s trade policies,” Wang noted. While Wang is bullish on Colombia’s prospects, he acknowledged that the country is subject to the same headwinds experienced by other countries. Still, he says “it is likely to outperform its emerging market peers.” Colombian stocks “are among the cheapest in emerging markets. Stocks are trading at near record low multiples and are at nearly 50% discount to the emerging market benchmark. The COP [Colombian peso] is deeply undervalued, and Colombian bond yields are among the highest in emerging markets, both in real and nominal terms,” he explained. Wang said he is overweight Colombian equities and bonds and has a long position in 10-year Colombian government bonds, which had a yield of 10.96% as of Jan. 27. His optimism comes amid growing investor interest in the South American country, thanks to its strategic location, favorable tax policies, growing consumer demand and expanding economy. The Colombian economy is expected to expand by 1.5% in 2024, up from 0.6% in 2023, according to the World Bank . The Banco de la Republica, Colombia’s central bank, expects economic growth to pick up even further in 2025, with gross domestic product expanding by 2.9% this year. Those factors have attracted the attention of other fund managers. “Colombia is small and it can easily be overlooked. But I like it — I think it’s an interesting value point and am especially optimistic on it in the second half of this year,” Malcolm Dorson, senior portfolio manager at Global X ETFs, told CNBC Pro this week. “The MSCI Colombia Index trades at depressed multiples of 0.84x book value with a 8.32% dividend yield. This means you can buy Colombian equities now and be paid an 8% dividend yield just to [potentially wait] until the political change [expected in] March of 2026,” he said , referring to Colombia’s presidential election. The MSCI Colombia Index — which tracks the performance of large- and mid-cap stocks on the Colombian market — is up 28.91% in the last 12 months, according to FactSet data. For comparison, the MSCI Emerging Markets index — which captures large- and mid-cap stocks across 24 emerging markets, including Brazil, China and India — gained 13.64% during the same period. Dorson is now playing the Colombian growth story with the likes of Ecopetrol, the largest petroleum firm in the country, and financial institution Bancolombia. Both stocks are listed on the Colombia Securities Exchange and trade as American Depositary Receipts (ADR) in the U.S. under the tickers EC and CIB . Dorson’s bets on the companies are somewhat contrarian, with all 12 of the analysts covering Ecopetrol’s ADR giving it a sell or hold rating, according to Factset. Meanwhile, 6 of the 7 analysts covering Bancolombia’s ADR give it a sell or hold rating. — CNBC’s Jesse Pound contributed to this report.
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