- Buoyed by higher commodities prices, EPU, the lone exchange traded fund devoted to Peruvian stocks, is up 22% year-to-date
- EPU is reflective of Peru’s status as a major miner of gold, silver and copper
- Economic data supportive a bullish outlook on EPU and Peruvian stocks
After several years of disappointing performances, Latin American equities are rebounding this year. While Brazil, the region’s largest economy, commands most of the attention, investors should sleep on Peru and the iShares MSCI All Peru Capped ETF (NYSEArca: EPU).
Buoyed by higher commodities prices, EPU, the lone exchange traded fund devoted to Peruvian stocks, is up 22% year-to-date. EPU is reflective of Peru’s status as a major miner of gold, silver and copper. The ETF devotes 46.4% of its weight to the materials sector and another 30.1% to financial services stocks. No other sector commands more than 8.8% of the ETF’s weight. [Peru ETF Looks for More Upside]
Economic data supportive a bullish outlook on EPU and Peruvian stocks.
“The latest data showed mining output slowed to 7.8% year over year, from a record high of 22.4% year over year in December, and construction, manufacturing and retail contracted by 2.7%, 3.9% and 2.6% year over year, respectively,” reports Dimitra DeFotis for Barron’s, citing Capital Economics data.
EPU has come a long way from struggling amid lower gold and silver prices (Peru is a major producer of both metals) and wondering about Peru’s market classification.
Index provider MSCI had previously warned that Peru was in danger of losing its emerging markets status and being demoted to the frontier markets designation. However, earlier this month, MSCI confirmed it is keeping Peru in the emerging markets group. The index provider did say that risks remain to Peru’s retention of emerging markets status.
“MSCI warned earlier in mid-August that Peru could be downgraded to frontier market status as only three securities from the country had met the size and liquidity requirements for emerging market status,” according to Emerging Equity.
“We still expect GDP growth to accelerate to around 3.7% in 2016, from 3.2% in 2015 … it is too soon to worry about a renewed slowdown in growth in the first quarter of 2016. … Mining output is likely to rise further in 2016 as a number of copper mines expand production. What’s more, government spending is set to remain supportive as planned infrastructure projects continue to be implemented. We doubt the upcoming presidential election in April will change the outlook much, either, as all the leading candidates appear to be committed to continuing with the current government’s fairly orthodox economic policy,” said Capital Economics in a note posted by Barron’s.
iShares MSCI All Peru Capped ETF
