FiNETIK – Asia and Latin America – Market News Network

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Mexico: The woerst behind us – September 2009 IXE – Banif Market Analysis

The data on Mexican economic activity are bad but probably now history. June GDP dropped 10.3%, the worst drop since the second quarter of 1995. The reasons are many, but two stand out. The first is a calendar issue due to holidays in April. The second still relates to the influenza that hit Mexico the hardest before anybody else.

Mexico – Monthly allocation – September 2009

Despite the weak scenario, the Bank of Mexico decided to maintain guidance and left rates unchanged in August. Unless some unexpected drastic change in the economy occurs, this rate should remain for the rest of the year. The next meeting is on September 18. Inflation numbers are better than expected, with forecasts for the year pointing to 4.13% p/yr, which means a slow down from the 5.12% p/yr of the last month.

September begins with President Calderon presenting the fiscal project to Congress by September 8. Congress will have about a month to analyze it. In the event of a rejection, it would have to go back to the Lower House, meaning it could take at least two months for final approval. The idea is to increase tax revenues in Mexico, one of the lowest in the Latin American continent. Little is known, however speculations point to an increase in the 17% rate charged on enterprise revenues (IETU). The government’s problem is the financing of the R$ 23 bn deficit estimated for 2010, which increases with lower oil production and prices.  

No earnings to drive stock price
Despite the strong performance of the Mexican stock market in August: up 4%, it is still lagging other emerging countries, as it is up by 26% YTD in comparison to Brazil that is up more than 50%. We expect short-term catalysts to move
stock prices in September. Our preference this month relates mostly to domestic stories, as we do not expect international issues to help the markets.

Outperforming the IPyC
Stock – Catalysts/Fundamentals
AMXL – regulator moving ahead on wireless regulation
ARA – Long-term performance should improve considerably
AUTLANB – still lagging the MexBol index
BIMBOA – September is a good month for food companies
FEMSAUBD – sales increase with Independence Day holiday
GAPB – passenger traffic numbers will outperform sector numbers
GEOB – undervalued in relation to the rest of the sector
GMEXICO – high upside on the final steps in the Asarco matter, despite the risk
ICA – new project represents three months of backlog
MAXCOM – trading at very low multiples with a good momentum
SIMEC – expected results recovery
WALMEXV – good month for retailers with the beginning of the new school year

Source: IXE-BANIF, 01.09.2009

Filed under: BMV - Mexico, Exchanges, Latin America, Mexico, News, , , , , , , , , , ,

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