Election Jitters Take Toll On Peru's Markets And Currency

[Derechos]

Source: Wallstreet Journal

LIMA (Dow Jones)--Analysts expect Peru's stock market and currency to suffer Monday on lower commodity prices and new data showing left-leaning nationalist leader Ollanta Humala leading the polls in the run up to the April 10 presidential election.

Humala has gained surprising popularity in the polls recently, although he is not seen winning a presumed second-round run-off against any of the other four more market-friendly candidates.

In midmorning trade the Lima Stock Exchange's broad General Index was down a sharp 3.44%, to 21476.63, while the Selective Index of blue chips was lower by 3.64%, to 29180.06. The key mining subindex had lost 3.42%.

"The general index could close lower by at least 2.5% today," said head trader at brokerage Cartisa SAB, Jose Luis Bustamante. Negative factors for the market Monday, said Bustamante, include Humala's higher poll ratings and lower commodity prices due to ongoing concern over the situation in post-quake Japan.

Bustamante also said he expected the sol to be affected by the political noise, weakening to as much as PEN2.90 this week, as dollar values rise on demand.

According to a Peru Central Bank trader, during midmorning trade on Monday the sol was trading at PEN2.816. On Friday the sol weakened slightly to end PEN2.784 per U.S. dollar, compared to PEN2.779 per dollar on Thursday.

Other analysts agreed the polls would be a source of volatility Monday and over the next two weeks. "The sol is going to depreciate on the (poll) news, although Peru's Central Bank will be keeping a lid on things so the volatility will not be strong," said the managing director of investment bank Celfin Capital, Cesar Perez-Novoa. He expects the sol to hover around PEN2.80 to PEN2.85 to the dollar this week.

http://online.wsj.com/article/BT-CO-20110328-710651.html