Instant View: Peruvian markets to sell off if Humala confirmed

Reuters News
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Posted: Jun 05, 2011 6:28 PM
Instant View: Peruvian markets to sell off if Humala confirmed

NEW YORK (Reuters) - Left-wing former army commander Ollanta Humala is leading the race to become Peru's next president, exit polls showed on Sunday.

The results, if confirmed, will most likely trigger a sell-off in Peruvian markets on Monday, as many investors were betting on a victory of right-wing lawmaker Keiko Fujimori, considered more market-friendly.

Following are comments from analysts:

FELIPE HERNANDEZ, STRATEGIST AT RBS SECURITIES IN STAMFORD,

CONNECTICUT

"In the short term, once these results are confirmed, the market is likely to take it quite negatively. The currency can easily weaken to the levels it was trading when Humala won the first round of the elections.

"In the short term, it's very likely that we'll have an overshoot in the markets, but probably at a certain level it will become attractive for investors again and people should start buying on the possibility of Humala not being as bad as markets fear.

"A coalition with (former president Alexandre) Toledo would limit room for him to move forward with the most radical ideas of his plan.

"The overall market will be watching very closely what he says and what he does. And it's very likely that he will try to reassure the market if he sees a sell-off."

EDUARDO SUAREZ, SENIOR EMERGING MARKETS STRATEGIST AT RBC

IN TORONTO

"I would expect a negative reaction from the market from this result. People are somewhat mixed on how drastic the change in policy will be. He has been trying to moderate himself so I would imagine a negative reaction to Peruvian assets in the near term and then people will assess how true his moderation has been.

"Initially it won't have an impact (on the creation of the MILA, the new bourse which integrates the stock exchanges of Colombia, Chile and Peru). They will have to see what Humala does once he takes power. I imagine things will proceed as planned.

"This news is negative for bonds, it will put upward pressure on spreads."

(Reporting by Manuela Badawy and Walter Brandimarte; )