Shares of Chilean stocks were hopping Monday morning, with electric utility Enel Chile (ENIC -0.44%) up by 11.6% as of 11:30 a.m. ET, and banks Banco de Chile (BCH 0.14%) and Itau Corpbanca (ITCB 0.29%) up by 11.4% and 15.9%, respectively.
You can credit the voters of Chile for that.
As Bloomberg reported Monday morning, Chile wrapped up the first round of voting in its presidential election Sunday, and far-right candidate Jose Antonio Kast took 27.9% of the vote -- not enough for an outright win, but more than the 25.8% cast for his chief opponent on the left, Gabriel Boric. In the news agency's estimation, this result "squash[ed] the chances of the left overhauling the country's free-market economic model."
The result wasn't unexpected. Prior polling had also indicated that Kast would come out ahead. Nevertheless, polls aren't always reliable, and seeing that the actual votes confirmed Kast's lead was enough to send the Chilean peso up as much as 3.5% Monday. Investors are presumably reacting to the conservative candidate's promise to cut spending and cut taxes, too, "defending a free-market economic model that has underpinned three decades of rapid economic growth." It seems they like that prospect more than Boric's promises "to overhaul the system, abolishing privately run pension funds, raising taxes and boosting welfare benefits."
On top of all that, all three of these Chilean stocks were already trading at bargain-basement prices, positioning them well to outperform even if things only don't get worse -- and perhaps to seriously outperform if a rising peso strengthens their profits after the new administration takes office. Tiny Enel Chile and Itau Corpbanca trade for price-to-earnings ratios of less than 7 each, while the much larger Banco de Chile sells for only 13 times earnings -- a bargain if it achieves the near 15% annual earnings growth rate that analysts have forecast for it.
Next step -- runoff elections, which are scheduled to be held on Dec. 19.
While that leaves nearly a month in which the story might change, Bloomberg noted that conservative candidates in general -- not just Kast -- performed well during the first round of this election. This suggests that for now, at least, momentum is on the conservatives' side.
That's good news for investors, who can look forward to "a more market-friendly -- not only at the presidential level -- policy environment" in Chile after the final results arrive.