Peru Stocks to Rise 8% as Humala Concerns Ease, Ferrini Says (1)
2011-07-13 19:51:53.679 GMT
By John Quigley
July 13 (Bloomberg) -- Peru’s benchmark stock index, the region’s second-worst performer this year, will gain at least 8 percent by the end of December as President-elect Ollanta Humala clarifies plans to increase mining royalties and the economy recovers, said Aldo Ferrini, the head of investments at Peru's second-largest pension fund.
The Lima General Stock Index, down 14 percent year to date, may even post a “small gain” in 2011 should the outlook for the European and U.S. economies improve, Ferrini said in an interview today in Lima, where he oversees $9 billion of assets for AFP Integra, a unit of Amsterdam-based ING Groep NV.
Integra stepped up stock purchases in the eight weeks before the second-round presidential vote, when equities fell to a seven-month low on concern Humala would win and give the state greater control of the economy. The fund bought $300 million of Peru stocks in the period, including Credicorp Ltd., Southern Copper Corp. and Cia de Minas Buenaventura SA, “much more”
than it would normally, Ferrini said. Share prices may remain “attractive” for another six weeks as investors wait for Humala to take office and announce his economic policies.
“Anyone who waits until August to start buying is going to miss this opportunity,” Ferrini said. “Even with a windfall tax, Peru is going to remain an attractive place for the mining industry and the economy will keep growing.”
The Lima General Index rose 1.4 percent to 20,202.77 at
3:34 p.m. in New York. It’s decline this year trails only Colombia’s IGBC Index, which has dropped 14.2 percent.
Mining Contracts
Humala, a one-time ally of Venezuelan President Hugo Chavez, rattled investors during the presidential campaign with pledges to revise mining contracts and free-trade agreements with the U.S. and other nations. Humala as an army lieutenant colonel in 2000 led 50 soldiers who seized and occupied for a week one of Phoenix-based Southern Copper’s mines to protest corruption in the government of then-President Alberto Fujimori.
Humala, who takes office July 28, shifted his stance during the election campaign, shelving a platform that called for a new constitution and increased government control of natural resources. Still, companies have scaled back spending while they wait to hear details on Humala’s plans, including proposals to raise the minimum wage and enlarge state companies.
The central bank cut its 2011 growth forecast last month to
6.5 percent from 7 percent on slower private investment.
The value of assets managed by Peru’s four private pension funds fell 7.1 percent from six months earlier to $29.7 billion last month, according to the nation’s banking regulator.
Integra’s assets shrank 7.2 percent during that period.
Peruvian Bonds
Integra, the biggest holder of government debt in Peru, sold about 1.1 billion soles ($401 million) of longer-dated sol- denominated notes before the elections amid concern about growing inflation pressures, Ferrini said.
As bond prices fell in April, Integra stepped up purchases of shorter-dated bonds, he said. The company is ready to start buying bonds issued by the Humala government, he said.
“With the reduction in our position, we’re much more open to participate in new offerings,” he said. “It’s just a question of price.”
The yield on the nation’s benchmark 7.84 percent sol- denominated bond due August 2020 fell one basis point, or 0.01 percentage point, to 6.29 percent today, according to prices compiled by Bloomberg.
Ferrini said he will step up asset purchases overseas once Congress raises the limit on pension funds’ foreign investments.
Lawmakers will probably increase the cap to 50 percent from 30 percent before the new Congressional session starts July 28, he said.
The central bank increased the limit on pension funds’
overseas investments four times last year to help cool demand for soles as exports jumped 35 percent and policy makers raised borrowing costs to cool inflation.
For Related News and Information:
Peru and pension funds: TNI PERU PSN <GO> Top news from Latin America: TOPL <GO> Emerging markets news: EMTOP <GO>
--Editors: Brendan Walsh, Glenn J. Kalinoski
To contact the reporter on this story:
John Quigley in Lima at +511-614-6811 or
jquigley8@bloomberg.netTo contact the editor responsible for this story:
David Papadopoulos at +1-212-617-5105 or
papadopoulos@bloomberg.net
