Peru, Colombia, and Chile merge stock markets
The market alliance of the three right-leaning nations spanning most of South America's Pacific coast gives investors better exposure to assets linked to the region’s natural resources and its rising middle class.
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Aldo Defilippi, executive director of the American Chamber of Commerce of Peru, which represents 580 local and international companies with interests here, says he has received a number of calls from investors concerned about the election.Skip to next paragraph
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“In general terms, the companies don't have a preference for one candidate but a preference for what each candidate should do,” he says. Both candidates have tacked toward the political center, he says, and both have the capability of continuing the macroeconomic policies of the previous two administrations.
This should include supporting MILA, says Mr. Defilippi, which will give Peruvian companies a new way to raise capital by allowing Chilean and Colombian brokers to invest directly in the Lima stock exchange, and vice-versa, eliminating fees and hoops.
Mining companies dominate all three bourses, accounting for 60 percent of the Lima stock exchange alone, according to analyst Hector Collantes of Apoyo.
“The MILA brings closer to the market the opportunity to gain exposure to Peruvian consumption investment vehicles via those companies listed in Bogotá and Santiago,” says Mr. Collantes. “[M]ore investors and investment options might increase overall liquidity.”
On the MILA, the Lima exchange is the largest by number yet the smallest by market capitalization, with $83 billion spread over 248 companies at the end of April, according to the World Federation of Exchanges. The Santiago stock exchange had $343 billion among 230 companies at the end of April while the Colombia exchange had $217 billion among 83 companies.
What will MILA's future be?
If Mexico's $473 billion bourse were to join, MILA would exceed the Brazilian bourse's $1.6 trillion market capitalization. Yet another future, say analysts, could be Brazil purchasing MILA and wrapping it into the Bolsa de Valores de São Paulo (Bovespa).
Guevera agrees MILA will provide more investment opportunities in Peru, but the fact remains that the Lima stock exchange is tiny, seeing a daily trade volume of $30 to $40 million.
The Lima exchange hopes trading volume to grow 20 to 25 percent as a result of the merger. “There is a lot of interest from Chilean and Colombian investors to acquire mining and junior mining stocks listed on the Lima exchange. This will allow an increase in liquidity,” the press office wrote in an email to the Monitor.
With Peru's government in flux, Guevara says the economy here has greater immediate concerns than the launch of MILA.
“Peru has been on the market friendly side for the past 10 years, but there could be an adjustment," he says. "I think there is a lot of uncertainty.”