Peru Assets Rally as Leftist Frontrunner’s Poll Lead Narrows

Peru’s stocks and bonds jumped the most in more than five months after a poll showed the leftist front-runner in the country’s presidential race losing ground.

The survey published Friday found Pedro Castillo had 41% of voter preference versus 36% for former lawmaker Keiko Fujimori. Datum’s previous poll, on April 30, gave Castillo a nine-percentage point lead over Fujimori in the runoff.

Both Peru’s dollar bonds due in 2031 and the benchmark stock index climbed the most since November amid optimism over Castillo’s shrinking lead. The cost of insuring the country’s debt against default over the next five years dropped the most in almost two months, while 10-year local debt jumped the most in a year.

Peru Assets Rally as Leftist Frontrunner’s Poll Lead Narrows

Investors had grown concerned over Castillo’s wide lead, spurring a selloff in Peruvian assets. The former school teacher has proposed to rewrite the constitution, exercise more state control over “strategic industries” and redistribute wealth. Since winning the first-round of the election last month, he has sought to distance himself from the Marxist politics of his party.

The poll also found that 12% of voters remain undecided while 11% plan to cast blank or invalidated ballots.

Peru Assets Rally as Leftist Frontrunner’s Poll Lead Narrows

Fujimori is the daughter of jailed former President Alberto Fujimori and is herself facing corruption charges. She’s presented herself as a pro-business candidate who will defend the constitution.

Friday’s poll found Castillo winning in every region of Peru except the capital -- underscoring the nation’s rural-city divide.

The market may be overpricing the possibility of Castillo winning, Morgan Stanley strategists including Andres Jaime and Simon Waever said in a note Wednesday. They now recommend buying Peru’s local and hard-currency debt, an upgrade from the neutral stance they’d previously kept during the election process.

Still, as of Thursday, Peru’s dollar government bonds remain the worst-performers in the developing world so far this year, after serial defaulters Belize and Argentina.

Datum said the poll of 1,203 people has a margin of error of plus or minus 2.8%.

©2021 Bloomberg L.P.

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