09.17.2015
By Shanny Basar

Lima Exchange Aims to be London of LatAm 

Christian Laub, chairman of the Bolsa de Valores de Lima, said the exchange has long-term plans to become a regional hub in South America despite the possibility of Peru losing its emerging market status.

Last month index provider MSCI said in a statement that it was launching a consultation with investors on potentially downgrading the MSCI Peru Indexes from emerging to frontier markets. MSCI argued that only three securities in Peru meet the criteria for emerging markets stocks which include a minimum size, liquidity and market capitalisation.

In response a Peruvian delegation including Laub; Alonso Segura, minister of economics and finance; and Renzo Rossini, general manager of the Central Reserve Bank of Peru met with MSCI in New York on September 14 ahead of the index provider publishing its decision on September 30.

This week Laub was in London to meet investors. Yesterday he told Markets Media: “If Peru became a frontier market it would have a major impact on the exchange. The MSCI announcement was a surprise as we do comply with the minimum requirements of three stocks meeting the emerging markets criteria.”

Laub explained that the potential pool of investment is much larger for emerging markets than for frontier markets. In addition Peru is part of the Mercado Integrado Latino Americano (MILA) with the stock exchanges of Chile and Colombia and the Pacific Alliance with Chile, Colombia and Mexico – all emerging market countries.

He argued that the Lima exchange is also in the middle of a long-term plan to improve liquidity and turnover. Two years ago the exchange hired consultancy Oliver Wyman to develop a 12-year strategy for Lima to become a regional hub for the Andean region.  The bourse now owns 94% of its securities depositary and last year launched a family of indices with S&P.

“We want to become the London of South America,” Laub said. “One advantage in Peru is that our currency is fully convertible.”

In May Bolsa de Valores de Lima went live with the London Stock Exchange’s MillenniumIT trading technology to provide ultra low-latency trading across all asset classes for Peruvian exchange and establish multi-asset connectivity throughout the MILA region. This was the first live implementation for MillenniumIT in Latin America.

Francis Stenning, chief executive of Bolsa de Valores de Lima, said in a statement: “Upgrading our existing platform with next generation technology will allow us to offer more efficient services to the capital markets.”

Laub said the new technology platform will allow Lima to offer services such as stock lending and short selling. He said: “The securities regulator has just approved the possibility of algorithmic trading.”

In addition, in the last month, the Peruvian government has passed a law to remove a capital gains tax on share trading.

The exchange wants to attract new companies who need to raise equity finance to expand in the region and also persuade larger companies that currently list in New York to have a secondary listing in Peru. However he admitted that it is much cheaper for Peruvian companies to trade in New York, even though the Lima exchange halved its charges two years ago.

“We need to make our market more liquid to attract investors,” Laub added.

Peter Kohli, chief executive of DMS Funds, posted in a Nasdaq blog  that he remains bullish on Peru’s economy despite the MSCI review, especially in the light of the country’s latest economic numbers.

“The markets have been pounded with the only Peru focused investment, the iShares MSCI All Peru Capped down more than 23% year-to-date,” Kohli added. “However, the long-term picture for Peru, I believe, is positive and I will continue to include them in my outlook because they are making all the right moves to expand their economy beyond commodities.”

Featured image by harvepino/Dollar Photo Club

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