What happened
Shares of famed Chilean lithium miner Sociedad Quimica y Minera de Chile (SQM -3.39%) -- famed as one of the few ways investors can play the rise of electric vehicles powered by lithium batteries -- notched a swift 13.5% gain in early Monday trading, before falling back to enjoy a more modest 8.1% rise as of 11:15 a.m. EST.
Believe it or not, this entire price movement appears to be tied to an election victory in Chile.
Sociedad Quimica stock is on fire today. But is this good news for value investors? Image source: Getty Images.
So what
This morning, The Wall Street Journal ballyhooed the election of Sebastian Pinera as president of Chile as an event local voters hope will "reinvigorate the country's flagging economy."
"With more than 99% of ballots counted, Mr. Pinera had 54.6% of votes to the 45.4% of his rival, center-left television journalist Alejandro Guillier," reports the Journal. Given that Pinera ran on a platform of reducing Chile's government debt while transforming it "into a developed country, a Chile without poverty, a Chile with opportunities for all," hopes are high for economic improvement.
Now what
Over the past four years, Chile's gross domestic product growth averaged an anemic 1.8%, down from 5.3% in the period from 2009 to 2013 -- when Pinera was last in office. If he can repeat his former feat, chances are good that companies like Sociedad Quimica y Minera de Chile will benefit.
Given the lack of any other news out of the company today, I'd say that today's surprise surge in the company's stock price can be attributed mainly to this one electoral event. Whether it justifies buying into Sociedad Quimica y Minera de Chile stock at a P/E ratio of nearly 38 times earnings, though, remains to be seen.
