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Mexico: Economic recovery slowly materializing – April 2010- IXE-BANIF Monthly Analysis

We are increasingly positive on the Mexican market, although we await further hard data to confirm our expectations. We see many indications of a recovery, which are already reflecting on the local stock market. However, we believe that the continuation of a positive news flow might support further appreciation.

We continue to base our portfolio strategy on specific catalysts for the companies we find attractive. First quarter results have already started to influence some of our choices. For April, we maintained the core of our March portfolio, with weight unchanged for America Movil, Cemex, Genomma LAB, Grupo Mexico, Mexichem and Walmex, which together account for 70% of our portfolio’s total weight. For the remaining 30%, the changes were the inclusion of Femsa, Penoles ICA and Tlevisa, a reduction in weight of ARA and the withdrawal of Autlan, Axtel and GEO.

Our estimated GDP may need another upward revision

Recent statements from the Finance Minister suggest that the Mexican economy might grow 5% in 2010, while the official government estimate remains at 4.2%. If hard data confirm this trend, we might find our own 4.1% growth estimate demanding a further upward revision, although we increased our figure just last month. Recently released statistics, such as the creation of new jobs, the reduction in the rate of unemployment to 5.3% from 5.9%, and industrial production growth, support this economic strength. Expectations are for local consumption to recover, and demand in the US for Mexican products has already begun increasing.

Additionally, data released for February show that vehicle sales grew nearly 100% YoY.

Expectations for interest rate and inflation remain unchanged

Expectations for interest rates, currently at 4.5% pa, continue unchanged, as we continue to foresee increases of 0.25% applied only in September and in October. This is in line with expectations for 2010’s inflation, which we continue to estimate at 4.94%. S

See detailed Detailed Market Analysis Report – April 2010

Source: IXE Banif, 01.04.2010

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

Mexico: The bad news is finally out – December 2009 IXE Banif Market Analysis

Fitch has finally downgraded Mexican debt. However, as always, there is good news with the bad, for they say that the outlook is now stable. In addition, Congress has finally approved the tax increase, which should result in an improvement in government revenues, although the decision was not sufficient to avoid the downgrade. S&P has still to give its verdict on the country’s outlook. Expectations are that they will avoid downgrade and, as Fitch did, maintain a stable outlook, but with a higher notch.”

Mexico – Monthly Allocation – December 2009

The economic outlook seems to be improving. Although still negative, indicators are above expectations. GDP dropped 6.2% in 3Q09, which compares to the market’s estimated drop of 6.8%. For 2010, investors expect a turn around, estimating a 3.1% growth. Much still remains based on an improvement in the USA. Approximately 27% of the country’s economy depends on its neighbor.

Inflation watched closely

Inflation has not been a concern up to now, continuing below the 4% level. However, expectations are that the beginning of the year will show it moving above this level, increasing concerns that the Central Bank will start moving basic rates up. Expectations are that the beginning of an upward trend in rates will only start in September 2010. Investors will be on the lookout for the Mexican’s Central Bank estimate, scheduled for release during the first week of December.

Other data investors are going to be paying a lot of attention to during the next couple of weeks are on the US, especially Black Friday sales that will give an indication of how good (or bad) Christmas sales will probably be. An improvement should indicate an increase in remittances to Mexico, improving the Mexican economy.

No real concern with the change to Central Bank

The change in the President of the Central Bank is no real concern. Although doing a good job, the leaving President was eternally in dispute with President Calderon. Replacing him is Mr. Carstens, who is the Secretary of Finance, and who has good international exposure. The question that arises is who is going to replace him as Finance Secretary.

December is the month with the highest sales, due to Christmas. Thus, we are basing our portfolio on the stocks of companies that will benefit from this. We are not recommending any shorts this month.

Outperforming the IPyC – Recommended BUY Portfolio (“LONG”)

Stock – Catalysts/Fundamentals

AMXL – excellent results from the launching of promotions for post paid subscribers

AXTEL – possible change in foreign shareholder legislation

CEMEX – should successfully place convertible bonds

FEMSAUBD – reducing due to uncertainties coming from rumors

GAP – December traffic should be positive

GEOB – trading at attractive valuations

GMEXICOB – defensive play on copper price increases

ICA – expectations that it will win the tenders for more public projects

Peñoles – precious metal price seasonal increase

Simec – better outlook on USA auto sales in 2010

Televisa – looking for a JV to participate in wireless spectrum auctions

URBI – should do well on Moody’s and S&P’s upgrade and on attractive valulations

WALMEXV – strongest month for retailers with 4Q representing 30% of sales.

Source: IXE Banif, 01.12.2009

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

Mexican IPC Index ETF “iSHARES NAFTRAC” listed on Spain’s LATIBEX

BGI IShares listed it’s Mexican ETF (TRAC) NAFTRAC on the Spanish LATIBEX exchange on November 19th, 2009.

This is the first time a Mexican traded TRAC is listed abroad. It marks a significant recognition of the Mexican financial markets and in particular for BMV – Bolsa Mexicana de Valores (BMV) the Mexican Stock Exchange in it’s international expansion.

The NAFTRAC tracks the top 35 traded Mexican stocks according to the BMV IPC index. The TRAC was listed on April 16th, 2002 and was the first such instrument to be listed in Mexico and Latin America, and has become one of the most traded instruments in Mexico’s Stock Exchange.

Barclays Global Investors (BGI) Mexico, is underwriting and listing the TRAC on LATIBEX in Madrid, Spain.

Note: TRAC (Títulos Referenciados a Acciones) are the Mexican equivalent for ETF’s traded on the stock exchange and issued by BGI IShare Mexico

Note: BMV IPC tracks companies of global influence like WalMex, FEMSA (CocaCola), Telmex, Modelo, CEMEX, Bimbo, AMX, Bolsa and others with global operations and revenues. See latest performance of IPC here.

Source: BMV, 19.11.2009
Summarized translation by FiNETIK from BMV press release 19.11.2009

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

Mexico the NEW China ?

When it comes to global manufacturing, Mexico is quickly emerging as the “new” China.

According to corporate consultant AlixPartners, Mexico has leapfrogged China to be ranked as the cheapest country in the world for companies looking to manufacture products for the U.S. market. India is now No. 2, followed by China and then Brazil.

In fact, Mexico’s cost advantages and has become so cheap that even Chinese companies are moving there to capitalize on the trade advantages that come from geographic proximity.

The influx of Chinese manufacturers began early in the decade, as China-based firms in the cellular telephone, television, textile and automobile sectors began to establish maquiladora operations in Mexico. By 2005, there were 20-25 Chinese manufacturers operating in such Mexican states Chihuahua, Tamaulipas and Baja.

The investments were generally small, but the operations had managed to create nearly 4,000 jobs, Enrique Castro Septien, president of the Consejo Nacional de la Industria Maquiladora de Exportacion (CNIME), told the SourceMex news portal in a 2005 interview.

China’s push into Mexico became more concentrated, with China-based automakers Zhongxing Automobile Co., First Automotive Works (in partnership with Mexican retail/media heavyweight Grupo Salinas), Geely Automobile Holdings (PINK: GELYF) and ChangAn Automobile Group Co. Ltd. (the Chinese partner of Ford Motor Co. (NYSE: F) and Suzuki Motor Corp.), all announced plans to place automaking factories in Mexico.

Not all the plans would come to fruition. But Geely’s plan called for a three-phase project that would ultimately involve a $270 million investment and have a total annual capacity of 300,000 vehicles. ChangAn wants to churn out 50,000 vehicles a year. Both companies are taking these steps with the ultimate goal of selling cars to U.S. consumers.

Mexico’s allure as a production site that can serve the U.S. market isn’t limited to China-based suitors. U.S. companies are increasingly realizing that Mexico is a better option than China. Analysts are calling it “nearshoring” or “reverse globalization.” But the reality is this: With wages on the rise in China, ongoing worries about whipsaw energy and commodity prices, and a dollar-yuan relationship that’s destined to get much uglier before it has a chance of improving, manufacturers with an eye on the American market are increasingly realizing that Mexico trumps China in virtually every equation the producers run.

“China was like a recent graduate, hitting the job market for the first time and willing to work for next to nothing,” Mexico-manufacturing consultant German Dominguez told the Christian Science Monitor in an interview last year. But now China is experiencing “the perfect storm … it’s making Mexico – a country that had been the ugly duckling when it came to costs – look a lot better.”

The real eye opener was a 2008 speculative frenzy that sent crude oil prices up to a record level in excess of $147 a barrel – an escalation that caused shipping prices to soar. Suddenly, the labor cost advantage China enjoyed wasn’t enough to overcome the costs of shipping finished goods thousands of miles from Asia to North America. And that reality kick-started the concept of “nearshoring,” concluded an investment research report by Canadian investment bank CIBC World Markets Inc. (NYSE: CM)

“In a world of triple-digit oil prices, distance costs money,” the CIBC research analysts wrote. “And while trade liberalization and technology may have flattened the world, rising transport prices will once again make it rounder.”

Indeed, four factors are at work here.

Mexico’s “Fab Four”

  • The U.S.-Mexico Connection: There’s no question that China’s role in the post-financial-crisis world economy will continue to grow in importance. But contrary to the conventional wisdom, U.S. firms still export three times as much to Mexico as they do to China. Mexico gets 75% of its foreign direct investment from the United States, and sends 85% of its exports back across U.S. borders. As China’s cost and currency advantages dissipate, the fact that the United States and Mexico are right next to one another makes it logical to keep the factories in this hemisphere – if for no other reason that to shorten the supply chain and to hold down shipping costs. This is particularly important for companies like Johnson & Johnson (NYSE: JNJ), Whirlpool Corp. (NYSE: WHR) and even the beleaguered auto parts maker Delphi Corp. (PINK: DPHIQ) which are involved in just-in-time manufacturing that requires parts be delivered only as fast as they are needed.
  • The Lost Cost Advantage: A decade or more ago, in any discussion of manufactured product costs, Asia was hands-down the low-cost producer. That’s a given no more. Recent reports – including the analysis by AlixPartners – show that Asia’s production costs are 15% or 20% higher than they were just four years ago. A U.S. Bureau of Labor Statistics report from March reaches the same conclusion. Compensation costs in East Asia – a region that includes China but excludes Japan – rose from 32% of U.S. wages in 2002 to 43% in 2007, the most recent statistics available. And since wages are advancing at a rate of 8% to 9% a year, and many types of taxes are escalating, too, East Asia’s overall costs have no doubt escalated even more in the two years since the BLS figures were reported.
  • The Creeping Currency Crisis: For the past few years, U.S. elected officials and corporate executives alike have groused that China keeps its currency artificially low to boost its exports, while also reducing U.S. imports. The U.S. trade deficit with China has soared, growing by $20.2 billion in August alone to reach $143 billion so far this year. The currency debate will be part of the discussion when U.S. President Barack Obama visits China starting Monday. Because China’s yuan has strengthened so much, goods made in China may not be the bargain they once were. Those currency crosscurrents aren’t a problem with the U.S. and Mexico, however. As of Monday, the dollar was down about 15% from its March 2009 high. At the same time, however, the Mexican peso had dropped 20% versus the dollar. So while the yuan was getting stronger as the dollar got cheaper, the peso was getting even cheaper versus the dollar.
  • Trade Alliance Central: Everyone’s familiar with the North American Free Trade Agreement (NAFTA).  But not everyone understands the impact that NAFTA has had. It isn’t just window-dressing: Mexico’s trade with the United States and Canada has tripled since NAFTA was enacted in 1994. What’s more, Mexico has 12 free-trade agreements that involve more than 40 countries – more than any other country and enough to cover more than 90% of the country’s foreign trade. Its goods can be exported – duty-free – to the United States, Canada, the European Union, most of Central and Latin America, and to Japan.

In the global scheme of things, what I am telling you here probably won’t be a game-changer when it comes to China. That country is an economic juggernaut and is a market that U.S. investors cannot afford to ignore.  Given China’s emerging strength and its increasingly dominant financial position, it’s going to have its own consumer markets to service for decades to come.

Two Profit Play Candidates

From a regional standpoint, these developments all show that we’re in the earliest stages of what could be an even-closer Mexican/American relationship – enhancing the existing trade partnership in ways that benefit companies on both sides of the border (even companies that hail from other parts of the world).

In the meantime, we’ll be watching for signs of a resurgent Mexican manufacturing industry that’s ultimately driven by Chinese companies – because we know the American companies doing business with them will enjoy the fruits of their labor.

Since this is an early stage opportunity best for investors capable of stomaching some serious volatility, we’ll be watching for those Mexican companies likely to benefit from the capital that’s being newly deployed in their backyard.

Two of my favorite choices include:

  • Wal Mart de Mexico SAB de CV (OTC ADR: WMMVY): Also known as “Walmex,” this retailer has all the advantages of investing in its U.S. counterpart – albeit with a couple of twists. Walmex’s third-quarter profits were up 18% and the company just started accepting bank deposits, a service that should boost store traffic. And while the U.S. retail market is highly saturated – which limits growth opportunities – there are still plenty of places to build Walmex stores south of the border. After all, somebody has to sell products to all those thousands of workers likely to be involved in the growing maquiladora sector.
  • Coca-Cola FEMSA SAB de CV (NYSE ADR: KOF): Things truly do go better with Coke – especially higher wages and an improved lifestyle. According to Reuters, Mexicans now consume more Coca-Cola beverages per capita than any other nation in the world. The company just posted a 25% jump in its third-quarter net earnings, aided by a strong 21% jump in revenue. Coca-Cola FEMSA continues to experience strong growth from its Oxxo convenience stores, and strong beer sales, too. And all three product groups are logical beneficiaries of strong maquiladora development and the growing incomes and rising family wealth that will translate into higher consumer spending in the immediately surrounding areas.

Source: Money Morning, 13.11.2009 by Keith Fitz-Gerald, Chief Investment Strategist,  Money Morning/The Money Map Report

Filed under: Brazil, China, Countries, India, Latin America, Mexico, News, , , , , , , , , , , , , , , , ,

Mexico: Waiting for Congress – October 2009 IXE-Banif Market Analysis

The world seems to be doing better, and with it the USA economy. The FED continues to maintain rates at very low levels, between 0 and 0.25%, and will likely not change this policy until mid 2010, and then only if inflation starts getting out of hand especially once governments finally take the step to start reducing liquidity.

Download: Mexico – Monthly allocation – October 2009
However, Mexico lags the rest of the world while it continues to await the discussion of Congress on the economic package. Congress has until November 15 to vote on the project. The vote is not an easy one as President Calderon asks for tax increases at a time when Mexico, more than other countries, suffers from the financial crisis. Thus, our expectation is that they will use all the time that they legally have to vote.

This means that we will probably see Mexico showing growth once more only in 2010, and only if the USA economic activity continues to develop positively, resulting in increased imports from the country. The increase in taxes brings with it another concern, inflation. One of the suggested measures is a 2% tax increase on food, which retailers will pass through to consumers. Thus, although there would be some room for interest rate decreases, the Bank of Mexico should maintain them unaltered until 1Q10, when they could actually increase them once more to prevent inflation.

Flow of funds and 3Q earnings will drive the market
One of the main indicators to watch in October is the amount of foreign resources flowing into Mexico. The fixed income has rallied of late with the amount of foreign resources going into the bond market. Part of these funds may change direction and, as in other parts of the world, start looking for opportunities in the Mexican stock market.
October is also a month when Mexican companies post their 3Q earnings. This will likely be one of the main drivers of the market this month. However, concerns on the effects of the fiscal package on some sectors may offset positive numbers for the quarter. We continue to bet on the homebuilding sector, as we believe demand continues strong and it continues to be a strategic sector for the government due to its social benefits and as it is a job creator in times of crisis.

Outperforming the IPyC
Stock – Catalysts/Fundamentals
AMXL – positive 3Q09 on MOU increase indicating higher revenues
ASURB– undervalued against sector, good value play
BIMBOA – will show EBITDA up by 60% and higher margins
FEMSAUBD – higher sales lead to positive 3Q09 earnings
GEOB – trading at attractive valuations
GMEXICOB – key month on legal process in the USA leads to a reduction in discount
GRUMAB – 3Q09 as strong as 1Q09 signifies a 70% growth
ICA – should post an excellent 3Q09 result
MEXCHEM – successful conclusion of bond issue allows for pre payment of debt
URBI – trading at attractive valuations
WALMEXV – expected 13% increase in EBITDA and 12% in sales

Source:Banif – IXE, 01.10.2009

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

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, , , , , , , , , , ,

Mexico: Too early to be optimistic – August 2009 IXE – Banif Market Analysis

The Mexican economy seems to have hit rock bottom in 2Q09, but a strong recovery will not occur in the short-term. The Mexican Central Bank cut interest rates by 25 bps and should now maintain them at 4.5% for the rest of the year.
The President should suggest more structural changes in the economy in coming months, but expectations are that Congress will not approve them. All measures implemented by the Government during 1H09 (mainly incentives for the construction sector) could reflect positively in 3Q09, with results expected to be a little better. However, GDP should still present a 4.8% drop.

Mexico – Monthly allocation – August 2009

The USA’s 2Q09 GDP, released on last Friday (July 31), came at -1% which is better than market consensus of -1.5%. Although better than expected by market, the GDP composition does not show any consistent and significant improvement. In particular, the consumption of families worsened again after a slight improvement in 1Q09. Therefore, the Mexican economy cannot rely on short-term improvements in its exports to the US and remittance flows, the external market will not improve enough.
Additional Risks
It is important to mention that there are rumors of a risk to Mexico’s credit rating, which could suffer a downgrading by credit agencies.
1H09 seems to have reached rock bottom
Overall, figures in 1H09 seem to have hit rock bottom for both the Mexican economy and companies. However, we do not see any strong recovery in 3Q09 (forecast of a 4.8% drop in GDP) due mainly to its dependency on the US. Therefore, we are suggesting a still more defensive portfolio for August, due to the lack of positive triggers and because of the risk of Mexico suffering a credit downgrade.
Outperforming the IPyC
Stock – Catalysts/Fundamentals
AMXL – reported strong 2Q09 earnings
AUTLANB – strongly laggging the MexBol index
OMAB – discounted in relation to its peers
BIMBOA – good 2Q09 results and expectations are from improvement in the USA
CEMEXCPO– expectations of a refinancing announcement in August
FEMSAUBD – organic growth and increase in sales due to hot weather
GEOB – good 2Q09 results
GMEXICO – expectations are for a favorable judicial decision to its liabilities
GRUMAB – better operational performance than the sector
MEXCHEM –already placed almost 80% of its P$ 2.6 bn capital increase
TLEVISACPO – reducing weight due to higher competition
WALMEXV – still outperforming the sector

Source: Banif-IXE, 03.08.2009

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

Mexico: Needed or Unneeded Changes – July 2009 IXE – Banif Market Analysis

Indications are that a new beginning is on its way. US indicators point to the worst being over. The second half of the year starts with signs of a new beginning. The question is not if Mexico will start running when the starter pulls the trigger, but by how many months will it lag behind.

History is unable to repeat itself
Expectations are now that the Mexican economy will contract 8% in the 2Q09 (5.7% previously). Not even the likely improvements in house and car sales in the USA seem to help.  This is the largest slump since 1995, but recovery from that crisis was quick, as it only related to internal factors, so the strong growth of outer elements strengthened the patient.

This time things are not as easy. This time the only reason the outside world is not in as bad a condition as Mexico is because it caught a milder form of the flu. Although data released in the next few months should show 2Q09 as the worst period, this does not mean that from now on the Mexican economy will recover quickly, as production was down substantially and consumption only rose as people prepared for confinement because of the human version of the Swine Flu.

The government is doing all it can to reduce the pain, but the medicine is weak. It is reducing public spending but needs approval from Congress that is currently on summer holidays. Currently its main effort is on controlling the Peso at around P$ 13.00/US$. In addition, it is preparing for structural changes. The crisis that caught the world off guard demands it. Oil prices at US$ 150/boe (even if they did not stay there for long) led to the need for more efficient engines. Mexico does not have the experience to supply them and will need to adapt quickly, or lose ground at its economic base, the USA.

Starting the second half on first half results
July is the month when Mexican companies publish 1H results. Although we do not expect anything brilliant, we believe that some opportunities arise. The construction sector, which has lagged the market, will probably be one of the big winners from now on, as government incentives sink in.  We are staying out of the airport segment this month as we expect to see decreasing traffic data. This month we do not recommend any shorts.Download: Mexico – Monthly allocation – July 2009

Outperforming the IPyC
Stock – Catalysts/Fundamentals
AMXL – good 2Q09 earnings on a 17% traffic growth
AUTLANB – expected steel/ferroalloy price recovery
BIMBOA – will continue to show positive synergy gains from its recent acquisition
CEMEXCPO– expectations of a refinancing announcement in July
KOFL – strong performances of KOF and convenience stores
GEOB – will likely post the best report in the sector
GMEXICO – close to a l ruling on Asarco with creditors analyzing best offer in July
GRUMAB – expectations of positive operating results in 2Q09
IDEALB-1 – we believe that 2Q09 will show a 50% EBITDA growth
MEXCHEM – expected double-digit EBITDA growth
TLEVISACPO – strong 2Q09 coming from the consolidation of cables and advertising
WALMEXV – will continue to outperform peers with double-digit growth

Source: IXE & Banif, 01.07.2009

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

Mexico: Market is Bottoming Out – June2009 IXE – Banif Analysis

Mexico has probably seen the worst of economic data, but all efforts to revert the negative situation will only show up in the second half. The Government was actually quick in implementing measures to contain the downturn but, despite the continuous drain to the country’s fiscal situation, fruits from these efforts will only come about in 2H09.
Rating agencies are keeping a close watch on indicators and the imminent reduction of the country’s rating. This would be badly regarded by the financial community for, although it does not signify losing the valuable Investment Grade label, a downgrade is always a blow.
There is always good to the bad.
Economic activity dropped by 8.2% in 1Q09 with industrials the worst hit, contracting 9.9%. This is the worst performance since 1995. Exports are down but worse than that, imports have also dropped. On the other hand, the dollar continues to weaken around the globe and against the Mexican Peso, stabilizing at around P$ 13/US$. This should allow the Bank of Mexico to reduce interest rates by 50 bps in June and another 25 bps in July, to end the year at 4.5%.
Summer is here, with or without tourists
Mexico has always been a tourist pole, attracting not only the neighboring Americans but also people from the rest of the world looking for warm seas and white beaches. The country invested heavily in hotels and in infrastructure, successfully attracting tourists. However, there is one thing that all are afraid of, and that is illness whilst on holidays. The influenza (swine flu as generally known) hit Mexico the worst, creating a barrier between the white beaches and the tourist. The Government has taken steps, but there are no expectations of a full house this year.

On this note, we are putting into our portfolio this month some of the stock most affected by the influenza, such as airports. On the other hand, we are decreasing the weight of metals in our portfolio, as they have performed well and now look expensive.  Download: Mexico – Monthly allocation – June 2009 IXE Banif
Outperforming the IPyC – Recommended BUY Portfolio (“LONG”)
Stock – Catalysts/Fundamentals
AMXL – underweight on interconnection losses
Autlan – Higher manganese prices and discounted to peers
Bimbo – positive results even in the USA
Cemex – decreasing stake, as still waiting for its debt restructuring
GAP – government actions for summer should help airports
GEO – with an EV/EBITDA of 5.7x, it has the best valuation in the sector
GMexico – still waiting for the chapter 11 announcement in July
ICA – strong candidate for the Panama Canal expansion
Mexichem – positive results from efficiency and the strengthening of the Peso
Televisa – increase in the amount of viewers still due to the flu
Urbi – although not the cheapest, has traded at attractive valuations
Walmex – performing better than peers.

Source: IXE & Banif, 01.06.2009

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