Peru, Up 65% in 2010, Is Poised to Rise More

LIMA—Peru's stock market, which jumped 65% in 2010, is expected to continue ascending in the first quarter of 2011.

The same factors that drove growth in the Lima Stock Exchange's broad General Index last year should remain important in the new year, with construction, manufacturing, strong commodity prices and growing private investments leading the way.

The Lima Stock Exchange's broad General Index closed 2010 at 23374.57, within shouting distance of its July 2007 record high of 23789.75.

With three market-friendly candidates leading the polls ahead of April's election for president, stock-pickers say political volatility shouldn't be a concern.

Instead, Peru's red-hot economic growth will be more of an influence. Gross domestic product likely gained almost 9.0% in 2010, and economists see growth of about 6.5% in 2011.

Cesar Perez-Novoa, managing director of investment bank Celfin Capital, said he sees the main stock-market drivers in the first quarter as continued economic growth, good year-end financial results and strong commodities prices.

"We are bullish on the financial and commodity sectors," he said.

He added that data Celfin collected over the past eight years show that Peru's blue-chip Selective Index has returned 5.4% in U.S. dollar terms in the first quarter. "We see this being repeated or exceeded" in the first quarter of 2011, he said.

The biggest company in the financial-services sector is Credicorp Ltd., which gained about 52% in 2010.

In the mining sector, blue-chip copper company Southern Copper Corp. rose some 42% last year, while precious-metals company Cia. de Minas Buenaventura gained about 40% in 2010.

Gustavo Urrutia, an analyst with Lima-based brokerage Inteligo SAB, also said economic expansion and commodity prices should back the stock market's expected first-quarter growth. He also sees some upside for mining companies, particularly for producers of zinc, which he says were undervalued this past year.

"Right now, the political noise around the upcoming election is very low, as the latest polls show three market-friendly contenders leading the polls," he added.

Banco de Credito economist Alonso Segura was also positive, noting opportunities in construction, with the sector growing at an estimated 10% in the first quarter. Mr. Segura is also keen on the utilities sector and sees "some upside" for mining companies.

For the full year, Mr. Segura said he expects a general upward trend in the stock market of about 16%.