LONDON, Sept 16 (Reuters) - Daily turnover on Peru’s stock exchange should triple next year with the help of measures including tax breaks and cuts to transaction costs, the bourse’s chairman said as the country strives to avoid an exodus of foreign investors.
The $17 billion stock exchange has come under pressure to ramp up liquidity after index provider MSCI said last month it was seeking investor input on reclassifying the Lima-based bourse as a “frontier market”.
The South American country is keen to avoid slipping into that segment - a set of smaller and less liquid economies - and estimates such a reclassification may spark a flight of as much as $5 billion of foreign investor money.
Bourse chairman Christian Laub said daily turnover - currently at $8-10 million - should rise to $20 million to $30 million a day in 2016.
“Next year is going to be tough - we will have the Fed in the U.S. raising rates, we will have volatility from China, we are going to have elections in Peru, so all those things are tough things to cope with, but we can do this ... the numbers of the economy are quite strong,” he told Reuters on the sidelines of an investor meeting in London.
Peru has tax breaks coming into effect early next year, and it is working on cutting the transaction costs to encourage trade.
Laub said the bourse was also in talks with companies and investors on how to boost turnover, while it plans to launch a futures market in 2017 and also allow algorithmic trading.
“We are throwing open all the doors, and we will see what happens.”
Around 20-30 percent of shares listed on the mining-dominated stock exchange are held by foreign investors, estimated Laub. He is also hoping to see more initial public offerings, with IC Power Ltd - a subsidiary of Israel Corporation Ltd - expected to debut in November as part of a dual New York/Lima listing.
Around $1.6 trillion are benchmarked against MSCI’s emerging market indexes, in which Peru has a weighting of 0.38 percent as of mid-August. In comparison, just $13.3 billion is benchmarked to the MSCI frontier market indexes.
Peru’s select index has tumbled around 30 percent since the start of the year, compared to a 14 percent fall in MSCI’s broadest emerging market benchmark. (Reporting by Karin Strohecker; Editing by Jussi Rosendahl)