In Mexico, It Really Is the Economy, Stupid
Equity investors have bid up the value of Mexican stocks by 20% since last July. This matches the gain for the S&P and leaves broader emerging markets in the dust.
There is one tactical dilemma attached to buying a little Mexico: It is hard to invest in the country writ large without getting exposure to zillionaire Slim’s besieged America Movil (NASDAQ:AMOV), the largest Mexican company by far with a US ADR listing. The $3 billion iShares MSCI fund is pretty much the only game in town for Mexican ETFs, and America Movil represents 18% of its underlying shareholdings.
The fund was in fact soaring ahead of the S&P until early February, when analysts began to take seriously Pena Nieto’s threat to trust-bust America Movil, which controls 70% of the Mexico’s cellular market and 80% in fixed-line. The president duly laid out his plan in early March and it was passed by the Mexican senate a few days ago.
That is all good policy for Mexico – the Slim monopoly costs consumers and businesses $25 billion a year in gouged prices, according to the Organization for Economic Cooperation and Development – but of course bad for America Movil’s bottom line. The shares have lost 15% since Feb. 5, and the broader Mexican market has treaded water since then.
However, it looks like the bad news might be priced into America Movil at this point. The stock bottomed out in mid-March and has limped back a bit. Otherwise investors could bet directly on other Mexican companies traded on US exchanges. The two most solid lately have been cement maker Cemex (NYSE:CX), which between the upturn in US housing and the Pena Nieto bounce has nearly doubled since last July, and top domestically-owned bank Grupo Financiero Banorte (OTCMKTS:GBOOY), which has gained 47% over the past 10 months. One international company with heavy Mexico exposure is Spanish bank Banco Bilbao Vizcaya Argentaria (NYSE:BBVA). Its shares have gained 38% during the young Pena Nieto era.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.