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Peru ETF Shining on Gold Rally

The Peruvian market has delivered a stunning performance so far this year, thanks to a spurt in commodity prices. Peru is a commodity centric economy. In fact, it is one of the largest producers of gold and silver in the world.
 
The weakness in the global financial markets has helped precious metals, like gold and silver, to regain their sheen in 2016. Sluggish growth in China since the beginning of the year and the global oil market turbulence has lifted safe-haven demand. While SPDR Gold Trust ETF (GLD) has gained 15.2% year-to-date, iShares Silver Trust (SLV) has risen 7.7% (as of April 4,2016) (read: Ride on Gold Rally with Best ETFs and Stocks of 2016).
 
The jump in gold and silver prices was also supported by plunging interest rates on a global scale and Yellen’s dovish comments last month. The Fed Chair Janet Yellen stated that the U.S. central bank should proceed cautiously in adjusting policy rates. Yellen also highlighted changes in the economic environment since December, when the Fed raised rates for the first time in nearly a decade (read: ETF Winners & Losers Following Yellen Comments).
 
Being a large producer of precious metals, Peru greatly benefited from this trend. Given this, some investors may want to consider some level of exposure to the nation at this time. For investors looking to play this enticing market via basket approach, the following iShares ETF could make for an interesting choice (see all Latin American Equity ETFs here).
 
The iShares MSCI All Peru Capped ETF (EPU) provides an opportunity for a pure play in the Peruvian equity space. The fund has performed well in the year-to-date period and is up 26.5% as of April 4, 2016. The ETF was launched in June of 2009 and since then has managed to attract an asset base of $164.9 million. The product charges a net expense ratio of 64 basis points per annum and pays out 1.48% as an annual yield. EPU’s portfolio is composed of 26 stocks across various sectors. The ETF has its assets spread across the entire spectrum of market capitalization as well. Nearly 130,000 shares of EPU exchange hands each day (read: Top and Flop Country ETFs of Q1).
 
From a sector perspective, almost half of its total assets are allocated in the Material Sector (around 49.9%). Among other holdings, it also places its bets heavily in the Financial sector, which accounts for almost 27.8% of its total assets. Consumer Staples (8.8%), Utilities (5.7%), Industrials (5.1%) and Energy (1.2%) round out the rest of the portfolio.
 
It is also prudent to note that the ETF has an R-Squared value of just 35.6% against the S&P 500 (since inception). This implies that EPU has low levels of correlation with the broader U.S equity market. It thus provides an opportunity for international diversification for U.S investors seeking more emerging market assets (read: Can Emerging Market ETFs Sustain the Rally?). It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
 
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SPDR-GOLD TRUST (GLD): ETF Research Reports
 
ISHARS-SLVR TR (SLV): ETF Research Reports
 
ISHARS-MSCI PER (EPU): ETF Research Reports
 
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