Peru Buybacks Could Bolster Liquidity, Credicorp Says

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Peruvian issuers are contemplating share buybacks to counter the lowest volume in the Lima stock exchange since 2009, according to Credicorp.

Cementos Pacasmayo SAA has called a shareholder meeting for July 17 to vote on a buyback while Cia. Minera Milpo SAA, a zinc mining unit of Brazil’s Votorantim Metais SA, is studying such a move. While buybacks are rare in Peru, companies are considering them as a means of making their shares trade more in line with sales growth prospects, Credicorp analyst Hector Collantes said.

“Owners are trying to shine a light on fundamentals that investors seem to be missing,” Collantes said by phone from Lima. “If this results in an increase in liquidity and demand for the shares, other companies may follow suit.”

When Milpo announced in a June 17 regulatory filing that its largest shareholder, Votorantim Metais, began a tender offer to buy an additional 10 percent stake in the miner, it also said it was considering a buyback.

The average daily trading value on the Lima exchange fell to $6.1 million in June, the lowest since 2009, Credicorp said in a report to clients Wednesday.

Investors have been shying away from the local stock market because of taxes, a large weighting of mining companies amid a drop in commodity prices and economic concern, Collantes said. Peru charges a capital-gain tax of 5 percent.

(Corrects capital gains tax in sixth paragraph.)
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