Tuesday, June 7, 2011

Today's M^3 - Peruvian Stock Market - Not For the Faint of Heart

If you're looking for volatility, the Peruvian stock market is the place to trade. There have been huge swings over the past few months as the market reacted to the polling results of the presidential election. Investors panicked whenever the socialist candidate Humala, who is perceived as being from the Hugo Chavez mold, showed strong polling numbers. Yesterday the fears of those investors were realized when Humala came out victorious in a very tight race. The market reaction was severe: down 13% in a single day. That's in Flash Crash territory, although in this case there was an actual news event that caused the move whereas the Flash Crash came out of nowhere. The market made a nice rebound of 7% today although I don't know how reassuring that is for Peruvian investors over the long term. This chart doesn't really do justice to the severity of the moves:

(Click on image for a larger view. Click here for the current chart of the Peru Lima General Index.)

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