Mexico Market Monitor

Friday AM, February 3, 2023

Feb 03, 2023

MARKETS 

The IPC index of Mexico’s top 35 stocks closed February 2 at 53,874.91 pesos, down -2.33% from its January 26 close of 55,164.01. The impressive 11.17% year-to-date increase in the IPC compares to S&P500’s still good 8.86% increase. 

The MXN/USD exchange rate closed at 18.66 pesos to the dollar on February 2, down from 18.79 pesos on January 26. 

The Mexican 10-year bond (2031) closed Thursday with the yield at 8.52%, down from 8.70% on January 26.  

The IPC Top Stock Gainers for the week were: Q* (+10.59%), LABB (+8.80%), and TLEVIPCO (+5.60%), and the Biggest Losers were: ELEKTRA (-6.82%), SITES1 (-7.84%), and BBAJIOO (-7.59%).    

CORPORATE & MARKET NEWS 

Grupo Mexico has secured a $5 billion debt package for the proposed acquisition of Citigroup’s retail operations in Mexico, according to sources quite by news agencies. The move is a major step forward in Citigroup’s attempted sale of Banamex, which was first announced last January. The transaction reportedly values the Mexican bank at between $7-$8 billion dollars. The sources, who requested to remain anonymous, cautioned that a deal is not guaranteed and that the talks could fall apart, reported news agencies.

Source: El CEO

Pemex completed a $2 billion bond raising which will be used to pay off upcoming debt maturities. The bonds, which have an interest rate of 10.875%, have a maturity date of February 7, 2033. The bonds received demand five times the amount issued. Pemex said in a statement that the high demand allowed it to place the bond with a 50-basis point reduction versus the initial rate.

Grupo Aeroméxico, the country's flag carrier, will begin operating flights between Felipe Ángeles International Airport and Houston's main airport. Aeroméxico will skirt Mexico’s Category 2 status using the argument it is operating flights along an existing route: Mexico City-Houston. It will be the first international route for Mexico's newest airport.

Cemex, the largest cement company in the Americas, acquired a majority share in the Israeli construction, demolition and excavation waste recycling company Shtang Recycle, further strengthening the company’s sustainable investment strategy. Shtang, based in the Tel Aviv metropolitan area, has a 13-year license to build and operate a construction waste recycling plant, which will have a processing capacity of 600,000 tons per year, according to a company statement.

The US electric vehicle manufacturer Tesla is considering building a plant in an industrial park near the Felipe Ángeles 0 'AIFA' International Airport or Monterrey, according to statements made by Jesús Ramírez, the spokesman of the president to the media. It remains unclear how true this is.

Axtel, an integrated telecommunications service provider, increased the offer limit from $75 to $120 million dollars to partially repurchase an international bond and improve its liability profile.

Of BBVA's EUR6.6bn net attributable profit in 2022, a huge EUR4.2bn came from Mexico, or 63% of the total. Just for 4Q22 BBVA Mexico reported a profit of EUR1.2bn of the EUR1.68bn total, versus EUR365mn in Spain. For 2023 the bank is looking at a strong NII of 15% in Mexico, above the forecast loan growth of 12%.

Minu, the Mexican financial wellness tech company, raised $30mn in equity and $20mn in debt from leading VC investors, including Mexico’s Coppel Capital. According to Techcrunch, “the company has over 300 enterprise customers, like Grupo Modelo, Coppel and Cinemex, and its revenue grew more than five times between 2021 and 2022”. The company offers salary on demand, loans, payroll management, insurance among much else.

Fourth quarter earnings continued to trickle in and so far have been pretty strong. GCC beat expectations with double-digit price increases in the US and Mexico. FIBRAMQ was helped by nearshoring trends, boosting rents and occupancy. GMEXICO saw a mild drop in EBITDA beating expectations, as cash costs fell due to a by-product credit price increases. All eyes are now on its bid for Citibanamex. GMXT also posted solid numbers, with EBITDA up another 10% due to tariff hikes. GCARSO doubled its EBITDA in remarkable results driven by construction and retail. No wonder the stock is at all-time highs. BAJIO, Santander Mexico and Inbursa posted very good results helped by expanding NIMs as interest rates increased.

POLITICS 

AMLO stated he is confident that Mexico will soon be able to recover its Category 1 aviation status since it is complying with the standards of the US Federal Aviation Administration. He also assured that an agreement has been reached with the cargo airlines to move their operations from the Mexico City International Airport to the Felipe Ángeles International Airport. Additionally, the pilot’s union has said it is against the new cabotage rules (which allow international airlines to operate domestic routes). It is anticipated that some international flights will soon be sent to Felipe Ángeles airport.

The testimonies given during the trial of Genaro García Luna have revealed what is largely considered an open secret: drug traffickers were using the Mexico City International Airport. According to former federal police agent Raúl Arellano, while García Luna was Secretary of Public Security, the police allowed criminal groups to move drugs and money using airport terminals using codes.

AMLO put forth Rodrigo Alcázar and Giovanni Tapia as potential Cofece commissioners for a nine-year term. The appointments, however, must be ratified by the Upper House of the Mexican Congress. Alcázar Silva, who was previously put forth as a candidate on March 1, 2019, has a degree in Economics from the Instituto Tecnológico Autónomo de México (ITAM).

AMLOs approval rate declined to 54% in January from 56% in December, according to El Financiero. Meanwhile, his disapproval rate rose to 45%, the highest yet.

TRADE & ECONOMICS 

The Mexican economy grew 3.0% in 2022, from 5.5% in 2021, although lost momentum in the final part of the year, as a result of the accelerated rate hike cycle and high levels of inflation. GDP grew 0.4% from October to December 2022 seasonally adjusted compared to the previous three months, its fifth consecutive quarter of growth in the seasonally adjusted series. On an annual basis, in 4Q22 the country's economy advanced by 3.6% compared to the fourth quarter of 2021, its seventh consecutive quarter of growth according to preliminary figures from INEGI. Growth was evenly balanced between services and industry.

 The global indicator of business confidence in Mexico dropped 0.8 points from 45.1 points in December 2022 to 44.3 in January of this year. The indicator dips below the 50-point threshold that separates growth from contraction for the seventh consecutive month, in addition to falling to its lowest point in the last 23 months.

NEWS ABOUT MEXICO IN THE FOREIGN PRESS 

A Mexican soccer icon entered politics. Prosecutors say narcos followed

03/02/2023, Reuters, Drazen Jorgic

Why Chinese Companies Are Investing Billions in Mexico

03/02/2023, The New York Times, Peter Goodman

Mexico Presidential Hopeful Ebrard Confident of Clinching Nomination

02/02/2023, Bloomberg, Alex Vasquez

Mexico's president promises total withdrawal after term ends

02/02/2023, The Washington Post, AP

Tesla Expected to Announce Mexico Project Soon, Ebrard Says

02/02/2023, Bloomberg, Alex Vasquez and Amy Stillman

Some pharmacies in Mexico passing off fentanyl, meth as legitimate pharmaceuticals 