Investors have latched on to the 30% climb in Chilean equities this year, but some are starting to wonder if the rally can go any higher.

The November election looks set to bring right-wing candidate and former president Sebastián Piñera back to power. Although he's seen as more pro-growth than current leftist president Michelle Bachelet, it's unclear whether his win will continue to support the rally.

‘Chile is a well-run economy that has been hampered with poor policies,’ said T. Rowe Price's Verena Wachnitz, Citywire AA-rated manager of the T Rowe Latin American fund.

‘Expectations are that these regulations, taxes or progressive policies will be reduced or removed [under Piñera], which should help bolster growth from sub 2% to 3%.’

The Piñera factor could bring limited upside as the better-than expected international backdrop, resulting in high copper prices and a strong peso, have accounted for roughly 60% of the year-to-date returns of Chile's main index IPSA, according to a recent research note by Credicorp Capital. 

Non-domestic factors are expected to continue driving the run, meaning ‘it is likely that the political momentum for the market has already or is very close to max out,’ a Credicorp team led by Heinrich Lessau wrote. The firm moved Chile to neutral on the back of the strong returns already recorded.

Moreover, valuations have climbed high enough to prevent T. Rowe’s Wachnitz from upping her Chile allocation, particularly in the banking space. She added that new finds tend to be in value companies, which don’t fit her portfolio’s growth profile.

As of last week, Chilean equities were trading at 19.6 times 2018 estimated earnings, according to the Credicorp note. 

Peru play

As managers second guess Chile, Peru has been busy luring investors in.

Low inflation allowed the central bank to lower rates, and reconstruction efforts after the downpours caused by the El Niño weather pattern in March are supporting GDP recovery, said PineBridge Investments' Gustavo Pozzi, fund manager of its Latin America equity fund.

In addition, political tensions are being resolved following a cabinet reshuffle that has allowed for more collaboration between the presidency and the Congress, according to the Credicorp note, in which the firm moved Peru to overweight.

Against this backdrop, Wachnitz is playing the banking, retail and consumer product spaces. Her top Peru allocation was Credicorp at 3.2% as of September 30. 

‘Our contacts, particularly in retail, are telling us that growth is picking back up,’ she said.