chill out guys, page-4

Worth a read.

(Reuters) - "JPMorgan is recommending investors look for buying opportunities in Peruvian debt as local markets sell off following the victory of left-wing Ollanta Humala in the country's presidential elections.

Peruvian markets have been weakening in very volatile trade since Humala, who has recently tried to distance himself from Venezuela's Hugo Chavez, won the first round of elections in April 10.

They fell further on Monday after he defeated right-wing Keiko Fujimori, seen as a more market-friendly candidate, at the run-off election on Sunday.

JPMorgan and other research institutions said the selloff, at least in debt markets, looks exaggerated as Humala is unlikely to drastically change the macroeconomic policies that have steadily improved Peru's credit-worthiness in the past few years.

"I think that there's probably going to be at this stage of the game more positive than negative surprises. We would frankly look for opportunities to add exposure," Joyce Chang, global head of emerging markets research at JPMorgan, told the Reuters 2011 Investment Outlook Summit on Monday.

"I think the market has probably overreacted a bit here," she added, arguing that Peru's economic fundamentals remain "very strong."

Peru's dollar-denominated global bonds due 2033 fell 2.3 points in price to bid 133.500, yielding 6.011 percent, as investors feared Humala would increase state control over the economy and throw away fiscal discipline.

Peruvian debt spreads over U.S. Treasuries, a gauge of investors' aversion to the country's risk, widened 21 basis points to a near one-month high of 213 basis points, according to JPMorgan's EMBI+ index.

The cost of insuring Peru's debt also rose, with 5-year credit default swaps jumping to more than 180 basis points but retreating later in the afternoon. They were trading at 170.167 basis points late in the afternoon, up 24.027 basis points on the day, according to MarkIt data.

The selloff in CDS markets was not that acute, however, as investors were "buying on weakness," RBS Securities strategists Siobhan Morden and Felipe Hernandez said in a report.

"It likely speaks to the institutional strengths of Peru that the selloff in credit risk was quite limited," they said, recommending investors remain long on Peru's local-currency denominated bonds.

"We have consistently been biased toward long positions, on the view that the downside risks were limited in terms of economic policy management or loss of the investment grade rating."

Peruvian bonds will likely recover gradually as Humala appoints trusted technocrats to lead his economic team, RBS said.

At JPMorgan, most calls on Peru were from clients interested in buying Peruvian assets opportunistically, Chang said.

While investors still need to see who Humala will appoint to his economic team, his strategies "won't diverge very much from the existing set of policies," Chang said.

"I think the economic advisers and market reaction will probably temper" Humala's policies, she said."