Two weeks ago we discussed why we think Peru is the place to invest in 2014. The article was brief, but hopefully it got you interested in Peru as a country and a market to keep your eye on.
This post will discuss how to invest in Peru. The factbox below outlines Peru as a country.
Peru is a market-friendly country with a market-driven exchange rate and policies that are very friendly to foreign investment. In the previous article we highlighted the main challenge with Peru, and we will reiterate it here, if you do not speak Spanish, it is a very difficult place to invest.
Nevertheless, if you speak Spanish or this fails to faze you, then please read on.
The Peru Canada Chamber of Commerce had a great presentation on dual-listing on the BVL and TSX. It goes through in some detail the differences between the markets, and the advantages/disadvantages of each. It is a little dated (2011), but one point to note is that there are 180 companies listed on the TSX and TSX Venture Exchange with properties in Peru. This in addition to other investing mechanism such as the iShares MSCI All Peru Capped ETF mean there are several ways to invest in the country without opening a direct account. One thing to note is that despite being a passive fund, the fee on this ETF is 61bps.
A market overview for Peru is provided in the box below.
Peru has 73 companies that have a market cap over $5mm. The value traded on a monthly basis remains quite low. The average value traded per day over the last 2 years is $37mm for the market in aggregate. That provides sufficient liquidity for both foreign institutional and retail investors.
The box below lists the 73 companies with a market cap over $5mm USD.
There are 24 companies with over a $1bn market cap, including some well known foreign firms such as Southern Copper, Scotiabank, and BBVA. Given the trouble in opening an account in Peru, it may make sense to invest through either Peruvian ADRs or the domestic listings of firms such as Southern Copper.
Opening a bank account is not easy in Peru, and unless you are living in Peru or a Peruvian, we could not recommend trying to open one. One of the expat Peru blogs has a great summary of people’s difficulties opening a bank account.
With respect to opening an investment account for trading in Peru. We are in the midst of assessing its possibility. We have been told that it is possible, but unfortunately at this time lack any sort of quantifiable proof of this possibility. We are continuing to investigate, and will let you know what we find out. If any of you have information that could assist us, by all means please let us know.
In the meantime, KPMG has a great overview of the country here. This is a collaborative effort, and is one of the most impressive publications I have seen from a Frontier Market. If you are interested in Peru, it is a must read. Go to ‘share’ and you can download a copy. Much easier to read it that way.