Tuesday, June 7, 2011

Peruvian stocks bounce back from post-election nosedive

Peru’s stock market recuperated in trading on Tuesday after plummeting on Monday in the wake of Ollanta Humala’s presidential election victory.

The main index for the Peruvian stock exchange rose today by 6.97% to close at 19,881.10 points. The market’s blue chip stocks also rose by 6.18% to end at over 27,000 points and the national currency, the sol, also appreciated in value during trading today.

The rebound came after a black day for the stock exchange when the stock market tanked with a record single-day drop of 12.5%. Investors appeared to be spooked by the possibility that a Humala presidency would halt Peru’s high economic growth. "There will be that suspicion until he proves he's more like (former Brazilian president Luis Ignacio) Lula (da Silva) than (Venezuelan president Hugo) Chavez," said economist Newton Rosa to Reuters.

“My commitment with the people is to maintain economic growth along with social inclusion,” said Humala this morning as he urged Peruvians to “be calm.” In order to try to calm investor fears he also released the names of twenty people who will serve on his presidential transition team. All of the figures are reportedly “political moderates” and include an ex-economy minister and the former chief of Peru’s central bank.

The sky-is-falling fears over the economy under Humala can best be read in this editorial piece from the Investor Business Daily’s website. For some financial analysts, however, such an apocalyptic outlook for Peru’s economy is exaggerative:
“Markets were quick to react over concerns that Humala will be a radical president, but there are reasons to expect some policy stability in the near term,“ said Bank of America Merrill Lynch in a note Tuesday…

Among the reasons to expect near-term stability is a “divided” Peruvian Congress, which would make it “difficult for Humala to institute any radical changes, at least initially,” wrote economist Alejandro Rivera and fixed-income strategist Alberto Boquin at B. of A. Merrill Lynch in a report…

Humala plans to maintain the 1% deficit while increasing revenues through mining taxes and increasing spending on social programs, the broker said. “Still, we believe the government has ample resources to fund additional spending given the 39 billion nuevos soles ($14 billion) in central-government deposits at the central bank.”
Image- Raul Sifuentes/Getty Images via The Guardian (“Ollanta Humala, winner of Sunday's narrow presidential poll in Peru, addresses supporters in Lima.”)
Online Sources- InfoBAE.com, Bloomberg, MiamiHerald.com, Reuters, Clarin.com, AFP, Investors.com, MarketWatch

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