Peru ETF (EPU) launched Monday, June 22

Peru's first exchange traded fund, MSCI All Peru Capped Index Fund (EPU), started trading yesterday, Monday June 22, 2009.

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Seeking Alpha Reports:

The iShares MSCI All Peru Capped Index Fund (EPU) will allow US investors to easily access one of Latin America's hottest markets by tracking a pure free float market cap weighted index. Its 25 names are heavily concentrated in the materials sector (65%), with a particular focus on gold, silver, and copper. Its largest holding at 19% Cia De Minas Buenaventur (BVN) who produced nearly half a million ounces of gold last year (compared to Goldcorp's 2.4), and its second largest at 15% is Southern Copper (PCU), the biggest player in the world's fourth largest copper producing nation.

The fund also holds an 11% weighting in Credicorp (BAP) - Peru's largest financial firm with operations in commercial banking, insurance, and investment banking - whose shares have held up well during the crisis, and several smaller miners with operations in lead, zinc, and iron.
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Now then... it is time for a few "million dollar questions.

a) Does this ETF facilitate investment in Peruvian equities for international investors?
Yes, as one of the world's best performing benchmarks of the year, loaded with companies seeing gains of well over 60-70% from the beginning of 2009, it will indeed offer investors a way to tap into these companies not listed via ADR's or OTC.

b) Does this ETF accurately track a Peruvian benchmark , like the Lima General Index?
Time will tell. ETF's always claim that they do, but I won't fully believe it until I see hard data supporting such. This ETF does not track Peru's Lima General Index, but rather MSCI All Peru Capped Index. Click here to access a PDF that explains the methodology behind MSCI All Peru Capped Index.


c) Is now the right time to invest?

Here are some factors to consider when doing your own due diligence:

• Markets around the world are down and it seems the downward trends in recent markets might continue throughout the summer months.

• Copper, gold and silver have already had pretty amazing run ups in recent months and are Peru's crown jewels of commodity exports (yes there are others like zinc, but lets emphasize these major Peruvian money makers for the time being).

• Volatility due to the political risk associated with the upcoming Peruvian elections in 2011 which pit two extreme candidates of the left and right against one another. Ollanta Humala, the left-wing buddy of Chavez and Keiko Fujimori, right wing, daughter of former president & dictator Alberto Fujimori.

• Recent political unrest in the Amazon region which only calmed down after heated disputes between the government and indigenous protesters lead the deaths of many Peruvian police officers and the massacre of protesters, forced to rely on wooden spears to defend themselves against high powered weapons. *** Note, this is the opinion of this sites humble and open minded Peruvian-American blogger, who can trace his ancestry on his maternal grandfathers side back to the amazon provinces of San Martin and Amazonas, Peru.

• Perceived instability (political and financial) as a result of plummiting approval ratings of President Alan Garcia, who was instrumental is creating the climate for the recent protests in the Amazon--contrary to the popular belief of those who believe his propaganda. Garcia's administration loves to blame Hugo Chavez and Evo Morales for everything wrong with Peru and as crazy as it might be, it is a great deal like Ahmadinejad in Iran who blames the West whenever something goes wrong.

I have used this statement from Iran's state television station about the protests occurring right now to articulate my point.

"At least 10 people were killed in the latest unrest to shake Tehran (Bagua), state television said on Sunday as Iranian leaders (President Garcia's administration) took aim at Western "meddling" (Hugo Chavez and Evo Morales "meddling") in the post-election tumult (Peruvian Amazon Region) that has triggered the worst crisis since the Islamic revolution (the worst political unrest in his Presidential Term).

Invest wisely my friends! More to come on this topic at the end of the week.

Analysis by Benito

Corporacion Andina de Fomento Sells $1 Billion of 10-Year Notes

Corporacion Andina de Fomento sold $1 billion of 10-year notes, according to a person familiar with the transaction.

CAF sold the bonds to yield 4.5 percentage points above U.S. Treasuries, said the person, who declined to be identified.

[Source] -- Bloomberg

Japanese Housewives in control of $14.9 trillion in savings

Japan never ceases to amaze me. When I first traveled to the island I was an angry, impatient New Yorker. I decided to stop over in Japan to visit a old friend of mine on route to Beijing for a semester abroad.

I had no idea what I was getting into. I spoke a bit of Chinese, but no Japanese, and had prepared little else besides a youth hostel in Tokyo for my first week in the country.

I got off the subway at Asukasa, drenched in sweat from some of the worst August humidity I have ever felt in my life—and trust me I have felt bad humidity... The beginning of the Amazon in the province of San Martin, Peru or the swamps of Louisiana do not compare.

After twenty minutes of wandering I was drenched from head to toe in sweat. I walked into a laundry mat and before I could talk three workers quickly helped me inside. They handed me a glass of water, a cold washcloth and offered me a seat.

The workers got on their store computer, found map quest directions and then proceeded to carry my bags for twenty minutes up some intense hills, across ridiculous intersections and all the way to the door of my hostel. They then refused a tip. I did not even know what to say, except, “how do you say thank you in Japanese?”

"Ari-ga-to"

Today, Bloomberg ran a interesting story on the return Yen carry trade, which is when traders in Japan take out cheap loans at Japan's 0.1% interest rate and invest it in higher yielding foreign bonds where the interest rate is higher.

The article talks about the return of “housewives.” Housewives you say? As it turns out, housewives usually manage investing their family savings. Japanese families currently have a incredible $14.9 trillion in savings!

Ron Harui of Bloomberg writes:

“They’re seeking higher returns after the central bank cut its benchmark interest rate to 0.1 percent. Investors who sell the yen against the euro would earn 3.4 percent by year-end, compared with 0.25 percent in one-year yen-denominated deposit accounts, data compiled by Bloomberg show."


Question: If Japan has all this capital sitting on the side lines, would it not be wise to figure out a way to invest a higher portion of it in Japan?

Japan's central bank is essentially stuck in a catch 22. On one side the low interest rate stimulates growth by encouraging lending. However, if the money being lent is invested internationally in foreign bonds that yield a higher rate of return than a Japanese savings account, the true goal maintaining low interest rates is not being achieved.

The way things stand at the moment, Japanese savers are technically helping fund Australia's huge budget deficit through the purchase Australia's higher yielding bonds.

I'm sure the matter is more complicated than my gross simplification. I welcome comments from someone more familiar with Japan's financial sector.

Weekend Newswire: South-South Cooperation

[Brazil - Argentina] -- Brazil, Argentina Working on $1.5 Billion Credit Line
Brazil and Argentina are nearing agreement on a “precautionary” measure to create a $1.5 billion credit line to help boost liquidity amid the global financial slowdown, ministers from the two countries said.

As many as seven countries, including Argentina and Uruguay, may establish reciprocal credit lines to help boost liquidity in South America, Brazilian Finance Minister Guido Mantega told reporters in Buenos Aires. Argentine Economy Minister Carlos Fernandez said the credit line with Brazil would be for the equivalent of $1.5 billion in local currencies.


[Peru - South Korea] -- Peru, S Korea to hold 2nd round of FTA talks
The Second Round of Negotiations for a Free Trade Agreement (FTA) between Peru and the Republic of Korea will be held in the Peruvian capital Lima on May 11-14, the Ministry of Foreign Trade and Tourism (Mincetur) reported Sunday.

On Monday, the negotiating teams will discuss issues such as dispute settlement, trade remedies, temporary entry, investment, sanitary and phytosanitary measures, cooperation, rules of origin and public purchases.

On Tuesday, they will discuss trade in goods, intellectual property, telecommunications and financial services.

On Wednesday, the meeting will focus on institutional and labor matters, financial services and competition policy.

On Thursday, issues to be discussed include customs and trade facilitation, services and investments, as well as environment.


[China - Zambia] -- Zambia picks China group to run Luanshya copper mine
Zambia on Friday selected Chinese company NFC Africa as the new investor to run the closed Luanshya Copper Mines (LCM), which is due to restart production at the end of May.

"It is now with great pleasure that I announce the sale of the 85% shares to China Nonferrous Metals Mining, commonly known as NFCA," Zambia's President Rupiah Banda told former Luanshya Copper Mines workers at a public meeting.

China bans foreign financial news operations -- FT Asia

Personal Analysis... no comment... Perhaps some other time. For now let me be clear the opinions expressed in this specific entry are those of the Financial Times and their journalists.

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China raised the spectre of renewed international trade friction over market access for foreign financial information providers as the government said such businesses must not engage in news gathering in China.

The surprise ban on this business area is seen by industry executives as backtracking on an agreement China reached with the US, the EU and Canada in November last year on allowing companies like Bloomberg, Dow Jones and Thomson Reuters to distribute information to financial and corporate clients.

...

“Thomson Reuters has developed an excellent relationship with SCIO over many years and looks forward to working with them on the successful implementation of the new measures to ensure that financial markets in China are as well informed as their counterparts outside China,” said Henry Manisty, global head of government and regulatory affairs at Thomson Reuters.

Dow Jones and Bloomberg were not immediately available for comment.

China has required foreign news agencies to distribute to media clients only through Xinhua for more than 50 years. This will not change, and the foreign players do not challenge this arrangement for their news agency business which helps the Chinese government ensure news does not reach the public uncensored.

Click here to access this FT Asia article

China vs United States: A visual comparison

All pictures from Mint.com/blog/finance-core

Peru's $ denominated bonds off to a good start

Peru's plan to raise money in the wake of the recent stock market rally has worked. International investors bought $1 billion worth of the new bonds yesterday (Wednesday, March 26), registering five times higher demand than than supply according to Peru's Minister of Economy and Finance, Luis Carranza.

Although I feel this sense of international confidence in unjustified, considering the true state of Peru's economy. It was still a very wise idea for Peru to raise money when it did.

As I expressed in this previous post, Peru will eventually have to face facts now that commodity revenues have declined thanks to falling prices.

Raising money when it did (before their debt rating is cut) was therefore a great idea. Whether international demand for the bonds was justified or not is not really important, surviving and raising money during these tumultuous times are what matters and it seems Peru is doing well at just that.

If you'd like to read more about this development check out this article from Andina News.

China's metals move a bright spot for sector -- theglobeandmail

Chinalco investing nearly $20-billion in Rio Tinto; deal suggests Canadian resources sector could climb out of doldrums sooner

ANDY HOFFMAN

February 13, 2009

MINING REPORTER

China's blockbuster deal to invest $19.5-billion (U.S.) in Rio Tinto Group bodes well for Canada's resource-driven economy as it shows the world's largest commodities consumer is betting on a faster-than-expected recovery in metals demand.

State-controlled China Aluminum Corp. (Chinalco) is buying $7.2-billion worth of convertible bonds and will pay $12.3-billion for stakes in eight of Rio Tinto's mines that produce a range of metals including iron ore, copper and aluminum.

Click here to access the full article from theglobeandmail

Asian stocks advance as Japan and Australia widen efforts to combat recession

Feb. 3 (Bloomberg) -- Asian stocks rose for the first time in three days, led by bank and technology shares, as Japan and Australia widened efforts to revive economic growth and memory- chip prices surged.

Click here to access the full article

Re-shuffling global assets from North to South – Vale do Rio Doce, Brazilian goes shopping for Rio Tinto's assets

The Ango-Australian mining giant, Rio Tinto Group is selling mining assets in Argentina, Brazil and Canada to Brazilian competitor Vale do Rio Doce for $1.6 billion Rio Tinto is facing tough times as it desperately tried to reduce its $39 billion debt.

Rio Tinto has reportedly already sold over $3 billion of assets. The company said “the latest sales represent a major step towards meeting its goal to reduce debt from $39 billion to $10 billion.

Did a bit of research and Vale do Rio Doce doesn't seem to have much debt. Which is a really good thing for miners right now! With commodity prices as low as they are, servicing debt is a dangerous thing. .

Vale however, because it saved it's penny's during the good times has managed to scoop up two of Rio's prized operations in Argentina and Brazil for pretty good price. Vale do Rio Doce paid $850 million for Rio's major potash operation in Argentina; and in Brazil it paid $750 million for the Corumba iron ore mine.

Citigroup analyst Clarke Wilkins said “the sale highlights good prices for assets can still be achieved in the current market. Indication that the assets are still perceived as viable long term investments even though commodity prices are so low. It may take time for them to recover, but when they do Vale do Rio Doce will make money from this purchase.

Check out what the stock has been doing recently. Good buy? Hmmmm.

Global trends worth watching

http://www.todaysfinancialnews.com -- Bill Patalon, one of the nation's top analytical business journalists, tell us where to invest -- even in this global economy.

"Follow the money."

10 Global Trends Worth Watching: TFN Market Insights
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