The Peru exchange traded fund strengthened Wednesday after Fitch Ratings upgraded the country’s credit rating, praising the economy’s ability to absorb shocks in the system.
The iShares MSCI All Peru Capped ETF (NYSEArca: EPU) was up 0.3% Wednesday. EPU has gained 5.5% over the past three months, but the fund is still down 23.4% year-to-date.
Fitch raised Peru’s foreign-currency rating to BBB+ from BBB as the higher rating better reflected the country’s ability to withstand slower global growth, reports John Quigley for Bloomberg. Anything BBB- or higher is considered investment grade quality.
“Peru’s established track record of policy coherence and credibility as well as the sovereign’s fiscal and external financing flexibility underpin its strong shock absorption capacity,” Peru said.
President Ollanta Humala is maintaining the government’s “pragmatic approach” to private investment. Additionally, Humala’s “conservative” policy could bolster fiscal surplus for the third consecutive year and cut debt tp 19% of GDP from 20% in 2012, according to Fitch.
“Continued pragmatism under the Humala administration and a steady progress on reforms suggests that the risk of a marked departure of economic policies has reduced,” Fitch added.
Peru’s economy is expected to expand 5.4% this year, down from 6.3% in 2012 due to the drop in prices in metals. Fitch, though, believes Peru can still outperform BBB-ranked economies, like Brazil, Panama and South Africa.