Peruvian Stocks Gain for Second Day as Humala Concerns Wane
Posted by admin(Updates with Zincore’s comment in fourth paragraph.)
June 8 (Bloomberg) — Peru stocks gained for a second day after President-elect Ollanta Humala said he may ask central bank President Julio Velarde to stay in his post, signaling to investors that his government won’t scrap policies that led to the region’s fastest economic growth.
The Lima General Index climbed 3.5 percent to 20,581.13 at 4:10 p.m. New York time, led by Cia. Minera Atacocha SA, the Lima-based silver and zinc miner, Volcan Cia. Minera SAA and oil producer Maple Energy Plc. The gauge rose 7 percent yesterday after plunging 12 percent on June 6. Peru’s currency, the sol, strengthened 0.5 percent to 2.7730 per U.S. dollar.
Humala, who won the June 5 presidential election over Congresswoman Keiko Fujimori, pledged early in his campaign to renegotiate mining and oil contracts and rewrite trade accords and the Constitution. He backed away from that stance in recent weeks as part of efforts to demonstrate he wouldn’t jeopardize economic growth. He said in an interview with CNN en Espanol last night that Velarde’s reappointment may calm investors.
“Humala has been radical in the past, but he’ll have to govern the way he has campaigned, using a moderate approach,” said Giovanni Susin, chief financial officer of Canadian mining exploration company Zincore Metals Inc., which trades in Lima.
Zincore, which also trades in Toronto, gained 5.9 percent to 36 cents. Atacocha advanced 6.7 percent to 1.12 soles while Volcan, Peru’s largest zinc producer, jumped 5.6 percent to 3.04 soles. Maple Energy, which also produces gas, rose 4.8 percent to 88 cents in Lima trading.
The yield on Peru’s 6.55 percent dollar-denominated bond due 2037 fell four basis points, or 0.04 percentage point, to 5.764 percent, according to prices compiled by Bloomberg.
‘Clear Signals’
Humala, a one-time ally of Venezuelan President Hugo Chavez, needs to send “clear signals” about his economic policies to reassure investors after the benchmark stock index plunged the most on record on June 6, Finance Minister Ismael Benavides said yesterday in an interview in Lima.
The government and central bank will boost liquidity in the financial system should there be a “substantial” withdrawal of funds, and contingency plans include measures such as lowering reserve requirements for financial institutions, Benavides said.
Humala needs a few more days to choose his Cabinet, economic policy aide Oscar Dancourt said.
“He knows very well the importance of maintaining macroeconomic stability, monetary and fiscal policy,” Dancourt, who Bank of America-Merrill Lynch said in a report yesterday may be a candidate for central bank chief, said in an interview. “He knows well the importance of the need to have an autonomous central bank.”
Toledo Deal
Humala offered six Cabinet posts, including finance minister and trade minister, to the party of former President Alejandro Toledo, Lima-based newspaper Peru.21 reported, citing people it didn’t identify. Toledo’s Peru Posible party is assessing a political alliance with Humala and hasn’t made a decision on joining his government, the newspaper said.
Peruvian companies, including Southern Copper Corp., the Andean country’s biggest producer of the metal, may lower 2012 earnings estimates after Humala’s victory because of a potential hike in mining royalties and corporate taxes, Deutsche Bank Securities Inc. said today in a note to clients.
“We expect downwards earnings revisions of high single digits overall, mainly due to potential hike in mining royalties and corporate taxes,” Deutsche Bank said in the note. “GDP growth will likely slow as investment is curtailed until the dust settles.”
Southern Copper shares were little changed at $31.50 in Lima.
Peru is the world’s biggest silver producer, and third in copper and zinc. Mining investment helped bring in $7.3 billion in foreign direct investment last year.
–With assistance from Alexander Emery, Helen Murphy and John Quigley in Lima and Alexander Cuadros and Leon Lazaroff in New York. Editors: Brendan Walsh, Richard Richtmyer
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