As stock exchange keeps rising, Peru prepares for a “flood” of foreign investors

The combined value of all shares on the Lima Stock Exchange (BVL) has risen by 300% in the last two years, going from US$25 billion to $100 billion, according to Ernesto Higueras, chairman of the Intercapital brokers’ firm.

He said that the value of the mining sector on the BVL has risen spectacularly in the last 18 to 24 months due to the positive effect generated by significant rises in international metals prices, which partially explains the astounding overall increase.

He added that some stocks have already risen 500% so far this year, due to a strong national economy and international minerals prices.

He categorically denied that the mineral sector of the BVL was “overbought or overvalued” as some analysts claim, saying that mineral stock prices are a fair reflection of the ever-increasing profitability of the companies involved.

He said that he is expecting good results from mining companies in the second quarter, as increases in metals prices are starting to reflected in the companies’ balance sheets.

He added that he is sure that the 70% rise attained so far this year will continue or stabilize, and that 2007 will prove a good year for the Lima exchange.

Talking about the increases in metals prices, he pointed out that the price of zinc is now regularly setting new records, and that gold could rise above $1,000 per ounce if demand from countries such as China and India follows its current trend. However, he added that the BVL will continue to rise in value for some time if metals prices merely remain at current levels.

“The high level of utilities of Peruvian companies fully justifies the success that the BVL is showing, an if the country reaches a credit level high enough for investment, we will suddenly see a strong influx of foreign investors,” said the analyst.

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