Citi Upgrades Peru Bolsa

Citi has upgraded Peru to overweight from neutral in its regional portfolio based on solid macro fundamentals, with GDP growth forecast to hit 7.9% this year. “The fiscal and current account surpluses for 2007 are forecast at comfortable levels of 3% and 1.8% of GDP respectively,” says Citi. It adds that while inflation is rising – in line with other countries in the region – it remains under control at 3.4% in 2007, held down by some recent tightening of monetary policy. “What makes the market look attractive at present is short-term timing,” says the shop. It adds that MSCI Peru is just 38% above its August 16 close, versus Brazil at 67% and says Peru’s ROE, at 37.6%, is the highest in EM. “Peru has seen a massive improvement in its average ROE from 10.5% in 2003,” says Citi. It adds Peruvian gold miner Buenaventura to the focus list alongside its preferred domestic play, Credicorp. Its play on Peru equity coincides with a bullish prediction for gold to reach $850-1,000. Citi also raised its mid-2008 target for the IGBVL index to 25,000.