The iShares MSCI All Peru Capped ETF (NYSEArca: EPU) is often overlooked compared to rival single-country Latin America exchange traded funds, such as the iShares MSCI Mexico Capped ETF (NYSEArca: EWW) and the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ).
With metals prices firming, investors may want to give the materials-heavy EPU, the lone Peru-specific ETF, another look. EPU has outperformed EWW this year, emerging as a steady contributor to the rebound in Latin American equities as some industrial and precious metals prices have bounced back.
Peru is the world’s third-largest silver producer and one of the largest gold and copper producers. EPU is reflective of the Peruvian economy’s leverage to metals exports and production with a massive 50.3% weight to the materials sector. That is well above the 27.8% allocated to financial services, EPU’s second-largest sector weight. [Silver Lifts Peru ETF]
“Peru’s mining industry is huge. While the country ranks 47th in terms of gross domestic product (GDP), falling between Algeria and Kazakhstan, it ranks fifth in the production of gold, and third in silver and copper. Last year, the companies in the Lima General Index that mine metals helped drag it down 25 percent; this year, they’ve helped it gain 10 percent,” reports Eric Balchunas for Bloomberg.
It is worth noting that Peru is not a one-trick pony dependent entirely on its mining industry.
“Peru has decent economic fundamentals. The inflation rate is 2 percent, the growth in its gross domestic product is 5 percent, and its debt represents just 18 percent of its GDP,” notes Balchunas.