The iShares MSCI All Peru Capped ETF (NYSEArca: EPU) is already this year’s best-performing emerging markets single-country exchange traded fund, but even with a 47.35 gain under its belt, EPU could be poised to offer more upside.
Latin American stocks and exchange traded funds are rebounding nicely this year, transforming from emerging markets laggards to leaders on the back of surging commodities prices. However, some of the region’s single-country ETFs remain overlooked, particularly as global investors pay renewed attention to Brazil, Latin America’s largest economy.
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Thanks to rebounding gold and silver prices and favorable results in the country’s recent presidential election, Peru is giving global investors reasons to give the South American economy another look and that should help EPU.
“Rising copper production and increased public investment aim to achieve growth of 3.5 percent in 2016 and 4.0 percent in 2017. While Peru’s growth averaged 5.8 percent from 2011 to 2015, we expect the economy will continue to outperform the ‘BBB’ median, with 2.4 percent and 2.9 percent growth in 2016 and 2017, respectively,” said Fitch Ratings in a recent note.
Latin America’s central bank policies are notable, at least among the region’s two largest economies, Brazil and Mexico. Although Brazil’s central bank has not hiked interest rates since last year, its benchmark borrowing cost of 14.25% is among the highest in the world, emerging or developed markets. Earlier this year, Mexico’s central bank surprisingly raised rates to help prop up the peso.