Peru stock exchange takes heavy loss, but analyst remain optimistic

Heavy selling on the Lima Stock Exchange (BVL) today brought about its biggest fall in the past 18 months, with a drop of 3.25% as against yesterday’s close leaving the General Index (IGRA or IGBVL) at 20,066 points.

The Selective Index (ISEL or ISBVL), composed of the 15 most traded shares, fared even worse: it dropped over 4% to 34,845.

A total of 147 million soles was traded in 3,094 operations.

Mining stocks were among the heaviest hit, with Peru Copper losing 14.88% over the day’s trading. Other significant losses were experienced by Cerro Verde (-8.40%), Scotiabank (-6.80%) y El Brocal Inversión (-6.70%).

Jorge Luis Rodríguez, head analyst for the Interbank-linked Centura investment broker, attributed the majority of the loss of the index as a whole to Peru Copper’s loss, after it failed to find a bidder for an acquisition or merger. He said that this one company’s losses account for a reduction of over 1% in the general index as a whole.

The rest of the loss he attributed to a continuation of the trend that has been apparent over the past two weeks for investors to sell shares in mining companies, due to a perceived volatility in international metals prices.  He pointed out that “while we didn’t see a further drop in metals prices today, we didn’t see any rise in them either”.

The exchange has been growing in value steadily for some 18 months, over which time it has quadrupled in value – mainly due to activity in the mining sector as international metals prices have continued to rise. The sudden drop in the Lima market over the last two weeks has been seen by many as a readjustment after slight overbuying of mining firms.

Rodríguez remains optimistic about the BVL’s future trends, once this readjustment is complete. Assuming no disastrous drop in international metals prices, he predicts that Peru’s strong and rapidly-growing economy will once again provide the impetus for continued increases in the value of Peruvian shares.

Other markets in the region are not sharing Peru’s current slump, with moderate increases registered around North and South America. In the country dubbed “the economic miracle of South America”, and where fortunes have been made in months on the stock exchange, investors are hoping that this downturn will prove just a blip in a record of ever-increasing growth.

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