by Anjali Cordeiro Dow Jones Newswires
NEW YORK-The International investors are starting to see buying opportunities in Peru's bonds denominated in local currency and dollars, then those assets will face pressure due to concerns that a leftist candidate could win the presidential election in the second round of 5 June.
Ollanta Humala, a former military officer and left-leaning candidate, has been involved in a fierce battle in the polls with a center-right candidate. In recent months, concerns that a Humala victory would translate into a greater state interference in the economy have put pressure on the Peruvian sol and bonds that country.
Despite the uncertainty in local markets, some large investors point out that there is no guarantee that Humala wins. And even if it did, as compared with former Brazilian President Luiz Inacio Lula da Silva, who initially was viewed with great caution on world markets but won the confidence of investors with a moderate policy agenda.
"There is a certain fact that [Humala] will win," said Sara Zervos, portfolio manager at OppenheimerFunds, who helps oversee about U.S. $ 11,000 million in emerging market debt outside of New York. "We believe that [even] if he wins, there is a well-established institutional framework for Peru not become an Argentina or Venezuela. "
His firm had few active positions in Peru before the election period because the valuations were high. But whatever the outcome of the elections, the analyst believes that a strong sell-off related to the election news now present a buying opportunity.
The Peruvian economy has performed well, growing 8.8% in GDP last year, and promotions in the local currency and stocks. That's expensive Peruvian assets, and the recent weak performance has only become more attractive to investors.
Within the global bond index Emerging Markets JP Morgan, Peru showed a return of 1% so far this year until last week, below the performance of the overall index, which posted returns of about 3%.
Humala has been involved in a fierce battle with the center-right legislator Keiko Fujimori. A new poll published Sunday showed that slightly Fujimori led the voting intentions for the second round on 5 June. A national survey conducted by pollster Ipsos Apoyo showed that Fujimori had 41% of the voting intentions compared with 39% for Humala.
That and other polls suggest the race is close and the outcome is uncertain. But the sun Peru, which lost ground against the dollar earlier this year, has recently rebounded to trade around 2.804 per dollar. Beyond the election result, it is possible that the central bank to intervene heavily to avoid large swings in the currency in either direction, said Alberto Ramos, a strategist at Goldman Sachs. Investors expect the central bank intervention remains generally stable currency. Paul
Cisilino, portfolio manager at Stone Harbor Investment Partners, which manages about U.S. $ 23,000 million in assets from emerging markets, says his firm is generally felt optimistic about Peru, although the recent escalation years has gone up the country's assets. His firm, which is interested in Peru's debt in local currency and hard currencies, and would be interested in increasing their exposure if there are more sell-off.
"It seems that Humala is not going to be a Chavez," said Cisilino referring to Venezuela's President Hugo Chavez. "I really take much effort to disrupt the foundations of [a] country."
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