Bolsa de Valores de Lima Announces Preventative Measures to Mitigate Potential Market Reclassification

LIMA, Peru, Sept. 8, 2015 /PRNewswire/ -- Bolsa de Valores de Lima (BVL) has announced that both the public and private sectors are coordinating measures in order to prevent the reclassification of the Peruvian market from an "Emerging" to a "Frontier" class.

On Thursday, August 13^th, MSCI Inc., one of the largest providers of indices for global investment funds, requested an international market consultation in order to assess Peru's market category due to the continuing decline in liquidity of the Peruvian local equity market, among other factors.

By maintaining its Emerging Market category, this will allow Peru to receive and manage investment flows similar to other thriving emerging countries, such as China, Brazil, India, Mexico, Colombia and Chile. The impact of this reclassification is a significantly negative threat to Peru's capital market and economy. In addition to the increased perception of risk, the vote will affect the currency exchange rate and local interest rates within Peru, impoverishing all Peruvians by reducing the value of their assets.

In order to reaffirm Peru as a thriving Emerging Market, the Peruvian market requires a joint effort between the private and public. In this sense, Peru has made progress in recent years by improving stock market retail culture through greater education and dissemination, the development of ETFs and derivatives, reducing trading fees, promoting regional integration (Integrated Latin American Markets – MILA) and developing Direct Market Access, among other measures.

Following this strategy, on September 8^th, the Peruvian Congress approved the "Law to Support the Liquidity and Integration of the Stock Exchange" with the goal of improving the dynamism of the equity capital markets in Peru. The legislation eliminates taxes on shares traded at the Lima Stock Exchange that are at the minimum liquidity levels and which transactions do not involve the change in control through a significant block trade.

Francis Stenning, Chief Executive Officer of the Bolsa de Valores de Lima, stated: "This is a very important step to increase the Peruvian market liquidity, allowing us to align the stock exchange with other countries in the region while increasing our competitiveness amongst the MILA market and the Pacific Alliance."  In addition, Mr. Stenning mentioned that it is a clear signal for the local market and international investors who saw the need to increase the liquidity in the Peruvian equity market and expand its size. "We have now an argument in our favor to support the position of Peru being an Emerging Market, while showing our capacity to become a financial center in the region".

The recently approved law has several implications, among which are increasing the competitiveness of the Peruvian capital markets in fiscal terms relative to other international stock exchanges, and particularly those that are part of the Integrated Latin America Markets (MILA) and the Pacific Alliance. The key issue is to attract more local investors as well international investors to help finance the capital needs of corporates in our country while generating more employment.

Additionally, the regulation seeks to create the necessary incentives to promote a greater liquidity and eliminates taxes for market makers. The presence of market makers is also fundamental to the infrastructure of any developed stock exchange in the world. 

The elimination of capital gains taxes along with the new incentives for market maker operations are significant steps to modernizing Peru's capital market. The BVL acknowledges that are not the only factors for global investors and the MSCI to base their investment decisions, but the Lima Stock Exchange does acknowledge that it is essential to recover the liquidity. There is a now a working agenda in place to further expand the relevance of the capital markets. The modernization needs to be deeper, and the BVL is fully committed to supporting the process and being an integral part of it.

The Lima Stock Exchange considers the news as a clear, strong and effective signal by the Government, represented by the Executive and Legislative power, to maintain Peru in the Emerging Market category.

The Lima Stock Exchange believes that this new joint effort of initiatives will provide confidence to global investors that the Peruvian market is improving and, despite international fluctuations, there is a commitment for the continuous development of the capital markets in Peru.

About Lima Stock Exchange

The Lima Stock Exchange is a company that is primarily intended to facilitate the trading of listed securities, providing services, systems and mechanisms for the intermediation of publicly offered securities, derivatives and instruments that are not subject to mass circulation traded on mechanisms various centralized bargaining bag wheel operating under the leadership of the Lima Stock Exchange, pursuant to the Securities Market Act and its complementary and / or regulations.

SOURCE Bolsa de Valores de Lima