Peru’s benchmark stock index surged after President-elect Ollanta Humala said Central Bank President Julio Velarde will remain in his post, signaling that policies that spurred the region’s fastest economic growth in the last decade will continue.
The Lima General Index rose 4.6 percent to 21,284.74, the biggest one-day gain since June 7. It was the biggest gainer among 91 equity indexes tracked by Bloomberg. The gauge was led by Canadian gold and copper exploration company Alturas Minerals Corp. and Caterpillar Inc. distributor Ferreyros SA. Velarde will serve another five-year term to help ensure economic stability, Humala said yesterday.
“Velarde’s appointment is a very good signal,” said Sebastian Blondet, a trader at Celfin Capital SAB. “The markets were waiting for a sign that Humala will maintain macroeconomic policies and a stable currency.”
Humala, who takes office July 28, is seeking to reassure investors concerned that his plans to raise mining royalties may slow private investment. Since being appointed in 2006 to head the central bank, Velarde, 59, has helped triple international reserves to a record $47 billion and raised lending rates to a two-year high in May to curb inflation, which has been the lowest in the region since 2006.
Peruvian bonds and the currency also gained. The sol increased 0.1 percent to 2.7375 per U.S. dollar, from 2.74 on July 15.
The yield on the nation’s benchmark 7.84 percent sol-denominated bond due August 2020 fell two basis points, or 0.02 percentage point, to 6.27 percent, according to prices compiled by Bloomberg. The bond’s price rose 0.15 centimo to 110.72 centimos per sol.
The extra yield investors demand to hold Peruvian bonds instead of Treasuries, or spread, narrowed to 1.74 percentage points today, according to JPMorgan Chase & Co.’s benchmark emerging-market index.
A surge in gold, the country’s second-biggest export earner after copper, also helped fuel the advance today. Fifteen of the 34 stocks in the index are mining shares, including five gold miners.
Humala said in a July 17 television interview he’ll seek to spur investment in the Andean nation’s mining and gas industries and pledged to announce ministerial posts on July 20.
Velarde introduced measures including raising reserve requirements for bank deposits to rein in lending. He increased the operating limit on pension fund managers’ investments overseas four times last year to help cool demand for the local currency.
Peru’s economy expanded 7.1 percent in May, the slowest pace in more than a year, as companies slowed spending on concern Humala’s policies may deter foreign investment.
“This is very positive news from a market perspective,” Credit Suisse AG economist Carola Sandy said today in an e-mailed report. “It signals that monetary policy will remain independent.”