By Tim Seymour
Going into next month’s runoff election, the Peruvian electorate looks deadlocked, but the country’s stock market is surging nonetheless.
As reflected by the Peruvian ETF (NYSEARCA:EPU), the Lima market has rallied 10% since Wednesday morning.
This is despite news that the two main candidates for the presidency — Ollanta Humala and Keiko Fujimori — are still effectively tied at 40% to 41% of the vote apiece. The market prefers Fujimori, even though his rival Humala has backtracked quite a bit from his previous Venezuela-leaning leftist rhetoric to focus more on a “Brazilian” form of business-friendly social reform.
In fact, part of the reason the market is rallying is that Fujimori was significantly behind Humala until a few weeks ago, when the polls started to reflect a virtual dead heat. Despite steering a bit farther from Hugo Chavez up in Venezuela, Humala would still like to nationalize Peru’s natural gas reserves and raise mining taxes. On the other hand, he would also institute a form of Social Security for retirees.
Apparently 18% of the population remains undecided.
As far as EPU goes, it is important to stay in this trade as a long. The elections will be a key driver and have been a major overhang holding this market back.