Peru Reserve Bank chief: stock exchange volatility down to inexperienced investors

Julio Velarde, the President of Peru’s Central Reserve Bank (BCRP) yesterday blamed recent instabilities of the Lima Stock Exchange (BVL) on the influx of a large number of inexperienced investors, drawn in by the indices’ high yield this year, who then panicked when prices started to drop. He estimated their total investment at around US$500 million.

“People without much experience on the exchange were jumping in, buying up the stocks that had already experienced a lot of growth this year. They bought when the stocks were highly valued, and when the indices started to drop they started to panic and moved to sell out,” said the finance director.

He attributed part of the recent sudden drop of the exchanges indices to this mass selling by small investors, who had been attracted by the exchange’s growth; but described the recent drop as a readjustment that is already over, and not indicative of a slowing in overall growth. He pointed out that the BVL has grown by 168% in the past twelve months, with 42% increase so far in 2007 alone.

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