Record losses on Lima Stock Exchange

The all-time record for losses registered on the Lima Stock Exchange the day before yesterday (around 4%) did not last long – yesterday’s trading made even that drop seem like a minor readjustment.

The General Index (IGRA or IGBVL, the most representative of the exchange as a whole) crashed by 7.59% to close at 18,543 points; while the Selective Index (ISEL or ISBVL), composed of the 15 most traded stocks, dropped by even more: 7.67%, closing at 32,171. Trading was fast and furious, with 3,991 operations totaling 510 million soles or US$161 million.

Among stocks that lost most value were Volcan Inversión (-15.00%), Minera Corona Inversión (-15.00%), Aceros Arequipa (-14.50%), Volcan B (-10.70%), Graña y Montero (-10.40%), Cerro Verde (-10.00%), El Brocal (-9.20%) and Austral Group (-11.00%).

Analyst Willy Espinoza, of Interbank’s trading company Centura SAB, said that a number of external and internal factors combined to make this the biggest drop in the exchange’s recent history. The mining sector, lynchpin of Peru’s economy, saw the biggest drop with an average of 8.12% lost.

“The exchange’s behavior was due to international metals prices, such as that of copper, which dropped due to fears of reduced demand from China. Gold also dropped, as the dollar rose against the Euro,” said the analyst.

He told the Andina agency that the Chinese government’s decision to triple taxes on stock exchange operations had repercussions on the Peruvian market, as well as on other trading floors around the world.

Another factor that he saw as a reason for the drop was “a number of individuals who invest in mutual funds liquefying their assets, as they do not realize that the profitability of the exchange is better measured in the long term, rather than day to day”.

All the same, analysts agree that yesterday’s move does not signal a long term downward trend, but rather a readjustment of stocks that may investors saw as overbought. Economic growth, the successful renegotiation of the Club de Paris foreign debt and continued strength in mining, agroindustry and tourism all present strong indicators for the market as a whole.

The drop in the Lima exchange was in no way mirrored in other stock exchanges in the region, which all closed trading yesterday with overall increases – in Chile, a neighboring country that is also heavily concentrated in the mining sector, the market indices reached record levels yesterday. New York exchanges also rose mildly.

One Response

  1. QUOTE: > Perhaps the investors are liquidating their holdings BECAUSE they have been in the market for the long term and want to get out brfore the bubble bursts!

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