* Foreign investors see opportunity in Peru sell-off
* Humala may talk the talk, but can he walk the walk?
* "It's going to have to be a show-me story"
By Herbert Lash
NEW YORK, April 14 Some on Wall Street don't
buy the Sell Peru story. Its growth prospects are too enticing
and the left-wing nationalist leading in the polls has pledged
to soften his stance if elected to the presidential palace.
Major U.S. fund managers invested in Peru are carefully
examining the election campaign and weighing the outlook for
the Andean nation, which is growing at an almost double digit
pace and reveling in a mining boom.
Ollanta Humala spooked investors when he surged to the
front in the first round of Peru's presidential race last
weekend. The country's stock market has plunged and the
currency slumped on fears Humala, who was pardoned for a brief
coup attempt in 2000, will boost mining taxes and take over
Masha Gordon, head of emerging market equity strategy at
PIMCO, which manages $1.2 trillion in assets, said Humala might
be compelled to tone down his left-wing rhetoric, aimed at the
large slice of voters not yet sharing in Peru's economic boom.
Humala has been signaling as much, with a key aide saying
on Wednesday that his goal for Peru is economic stability and
that he will not go down the road of left-wing leaders in
Venezuela and Bolivia if he wins the June 5 run-off. For
details see: [ID:nN13295500].
Gordon liked the low ratio of credit to the economy's size
in Peru, and calls the recent market sell-off enticing.
"When the market drops 14 percent, clearly that will garner
our interest," Gordon said. "After this drop, you can see the
markets are not trading at distressed levels, which is a good
sign. Investors are nervous, not panicked," she said.
Lima's general stock index .IGRA has tumbled almost 15
percent since March 28, when Humala gained in opinion polls and
failed to calm investors' nerves after delivering what was then
considered the most moderate speech of his career.
Jacek Dzierwa, global strategist at U.S. Global Investors
in San Antonio, said he hopes Humala will compare the strides
Peru has made if he wins, keep the country's pro-market
policies and not "throw everything into the waste basket."
The market's dip might be a buying opportunity, albeit a
calculated risk, said Dzierwa, who manages emerging market and
commodity-based equity assets.
"We will be watching because as I said, we are not pulling
out, we don't want to panic," said Dzierwa, who like other
investors was surprised by Humala's surge in the polls.
Investors were stumped by Sunday's voting when the two
candidates who appealed most to the poor -- Humala and Keiko
Fujimori, daughter of a jailed ex-president -- beat three other
candidates who were seen as far more market friendly.
"It's hard to understand what the electorate is expecting
out of this, why take the chance in a change of direction? It's
puzzling to me," said money manager Will Landers at BlackRock
Inc, where he oversees about $10.5 billion in Latin American
"It's disappointing because this is an economy that's been
one of the few in the region to grow at an Asian-type rate."
Even though chronic malnutrition remains high, according to
the World Bank, poverty levels have fallen by 30 percent since
2005 as foreign investment poured in and Peru even eked out
positive growth in 2009 during the global financial crisis.
Landers, who called Peru his favorite smaller-sized country
in the region, had reduced his exposure before Sunday's
election and said he now wished he had reduced it further.
"I don't think you need to be in any hurry to buy the dip
here," Lander said.
Investors are trying to parse what Humala or Fujimori might
do once in power and are looking for signs that would reassure
them, such as the appointment of cabinet members or a central
bank governor they would find credible.
Stacy Steimel, in charge of Latin American equities at
PineBridge Investments, which oversees about $85 billion in
assets, said she was underweight large cap Peruvian stocks but
owned a few positions in small caps she will hold for years.
Although Humala is trying to project the pragmatic image of
former President Luiz Inacio Lula da Silva of Brazil, Steimel
said she was unsure and waiting for confidence-building signs.
"He's trying to calm every one down, but can he become a
Lula? I don't know, we'll have to wait and see," Steimel said.
"It's going to have to be a show-me story."
(Additional reporting by Jennifer Ablan; Editing by Andrew