The process of monetary normalization by the Central Bank of Chile has followed its budgeted course, with the TPM already at 5.5%.

Meanwhile, in the September IPoM, the TPM corridor in the central scenario for the interest rate, the difference in basis points with respect to the June IPoM is significant, with an average TPM that would be around 50 basis points lower by 2025. In particular, the TPM at the end of this year would be 25 points lower than projected in June, i.e. 5.0% vs. 5.25% previously.

The scenario proposed by the IPoM is news for local fixed income. Indeed, prime rates continue to fall, especially long rates. Despite the fall in the medium short end, the 2-5 slope still looks attractive. With these movements, real rates between 2 and 3 years (which is the part of the curve where we are positioned in terms of duration) are already trading at historically average levels.

We continue to expect higher inflation than the market -which in 2024 would end at 4.8% and 2025 at 3.8%-, We therefore maintain our preference for a short duration strategy with high indexation to the UF and very good credit quality (AA). Higher projected inflation increases demand for UF-indexed instruments with maturities up to 3 years, which is the best way to "buy" UF-indexed instruments.The higher projected inflation increases the demand for UF indexed instruments with terms up to 3 years, which is the best way to "earn" the new projected inflation and with a lower market risk, so we maintain our preference for a short duration strategy with high indexation to the UF and very good credit quality.

For the rest, a duration of around 3 years should, in our opinion, be the "natural recipient" of OW in financial intermediation (time deposits and time deposits). (time deposits and money market) that the market still exhibits; at the same time, we recommend a gradual transition to riskier assets.

Further monetary easing is welcome for equities, although the performance of local equities will also depend on how international and especially emerging markets perform.Although the performance of local equities will also depend on how international and especially emerging markets evolve. Beyond that, what should happen is a consolidation of the sectorial leadership of the last months, with sectors more sensitive to interest rates and linked to the domestic cycle, especially banks, retail, y real estate.

However, China's recent monetary and fiscal stimulus announcements should also contribute to an improved should also contribute to a better performance of the commodity sector. commodities sector.

We continue to believe that Chilean equities offer an attractive risk-return trade-off, with a friendlier interest rate environment going forward, improving corporate earnings and highly discounted valuations.We continue to believe that Chilean equities offer an attractive risk-return trade-off, with a more friendly interest rate environment going forward, improving corporate earnings and highly discounted valuations.

Looking ahead to the remainder of 2024 -and already thinking more in 2025-, we should have some drivers drivers for local equities:

1. More room for further monetary easing. We expect the monetary policy rate to end 2024 at 5.0%, down from the current 5.5%, and converging to a neutral rate around 4.25% by the end of 2025.
2. An improvement in corporate earnings for this year and next year. Earnings growth of 5.4% during 2024 and 21.9% in 2025 (24.8% and 9.3%, respectively, when isolating SQM).
3. Highly discounted valuations. With IPSA trading at ~9x P/U fwd 12M, a 30% discount to its last 10-year averages.

Finally, the exchange rate trend will continue to be bullish as long as rate differentials continue to tilt towards the dollar.

For more information, please see the attached report.

Humberto Mora

Investment, Finance, and Business Manager; Stockbroker