MARKETS
The IPC index of Mexico’s top 35 stocks closed on March 9 at 53,426.77, up 0.18% from its March 2 close at 53,329.53. The +10.24% year-to-date increase in the IPC compares favorably to S&P500’s +2.05% increase.
The MXN/USD exchange rate closed at 18.34 pesos to the dollar on March 9, from 18.13 pesos on March 2, losing a bit of strength but remaining very strong.
The Mexican 10-year bond (2031) closed on Thursday with the yield at 9.15% from 9.38% on March 2.
The IPC Top Stock Gainers for the week were: VOLARIS (+7.69%), LABB (+6.41%) and FEMSA (+6.22%) and the Biggest Losers were: GMEXICO (-4.37%), GCC (-3.18%) and FEMSAUBD (-3.12%).
CORPORATE & MARKET NEWS
Walmart de México y Centroamérica reported that sales grew 10.8% y-o-y in 4Q22, with an 11.4% increase in Mexico. During its annual investor meeting, the company also announced that it would invest nearly US$ 1.5 billion in Mexico and Central America with 45% going to remodeling stores for omnichannel shopping, 29% going to new stores, 12% designated for increasing its supply chain, and 14% designated for e-commerce and technology projects. Walmart de México in particular will invest 12% of its resources to increase and modernize its supply chain and 14% in e-commerce and technology projects. It is also buying in IFPE (Regulated Fintech wallet) and will aim to grow its remittance business.
Liverpool held its annual investor day and aims to become the leader in omnichannel nonperishable retail, growing e-commerce by 3x in the next five years, leveraging its store footprint, huge existing 20 million customer base, leading credit card business, logistics expertise, and brand. The company expects to become the number one Electric Vehicle dealer in Mexico through its alliance with Chinese BYD.
Genomma LAB also held its investor day at its expensive new manufacturing plant. The focus was on margin expansion with the EBITDA margin expected to grow to 25% in 2025 and noncore brand divestments. LAB also announced that it would re-join the BMV stock index.
Soriana will invest between US$ 333.5 million and US$ 389.1 million this year, an increase of 50% to 70% over the previous year. With the additional funding, the supermarket chain plans to open 17 self-service stores and remodel 27 stores.
Ford will double its production of electric vehicles in Mexico with an investment of US$ 95 million to reach 201,000 vehicles per year by the end of 2023. The car manufacturer said it would focus on increasing the production of its Ford Bronco Sport and Maverick models in Mexico.
Airlines and airport operators reported their February traffic figures. Grupo Aeroportuario del Pacífico reported a 21.8% y-o-y increase in terminal passenger traffic. Grupo Aeroportuario del Sureste announced a 23.9% increase over February 2022 figures. Viva Aerobus reported a 25.5% y-o-y increase in total passenger traffic, a 26.2% increase in international traffic and 20.4% in domestic traffic. Volaris reported a 19.7% increase in total passenger traffic with a domestic increase of 16.1% and an international increase of 35.1%.
There was a flurry of sustainability bond issuance. Cemex tapped the market for a US$1 billion perpetual green bond, with a coupon of 9.15%. FUNO and OMA also issued sustainability-linked bonds for P6.7 billion and P3.2 billion respectively.
HCITY's sale of its five brands to Marriot International was approved by the COFECE, the competition commission, allowing for a May closing of the transaction. The proceeds from the sale will allow HCITY to deleverage its balance sheet while beginning a new phase of national and international growth under the Marriot brands and support.
Wrapping off a busy week, TotalPlay Telecomunicaciones bonds fell to distressed territory as investors questioned the company’s refinancing strategy in the face of upcoming debt payments, even as the company reported a 28% increase in income from services. According to data from Trace, yield on notes due in 2025 increased by more than 18% on Monday, after a week of selling which pushed prices down to 78 cents on the dollar.
Companies are announcing their Annual General Shareholders meetings and dividend policy: Alpek (held on March 7), Alfa (held on March 9), Femsa (March 31), and ASUR (April 26). Femsa proposed a dividend of P12.2 billion for a 2.2% yield. ASUR announced dividends for a 3.6% yield, and Alfa a big dividend and share cancellation (5% combined yield).
POLITICS
Movimiento Ciudadano announced that it would not participate in what it classified as a “farce” and withdrew from the state gubernatorial elections in the State of Mexico and Coahuila, alleging that the State of Mexico would go to Morena so that the PRI could remain in power in Coahuila.
As Mexico approaches the 2024 presidential elections, the latest polls from El Financiero put Morena in the clear lead either with Mexico City Mayor Claudia Sheinbaum, Foreign Affairs Minister Marcelo Ebrard or Secretary of Government Adán Augusto López Hernández as its candidate. Among the opposition, Lilly Téllez, Luis Donaldo Colosio and Claudia Ruiz Massieu are best positioned.
Thousands marched throughout the country on March 8 to demand an end to violence against women. In Mexico City alone 90,000 people are expected to have participated. According to recent polling, there is a general perception throughout the country that femicides have increased since last year.
TRADE & ECONOMICS
The United States has formally requested consultations under the terms of the United States-Mexico-Canada Agreement (USMCA) regarding Mexico’s plans to ban genetically modified corn by 2024. For context, about 90% of the corn grown in the United States is genetically modified. The parties will meet to discuss the matter within the next 30 days and, if talks are unsuccessful, the U.S. could pursue a formal panel to resolve the issue.
Consumption and fixed investment had a good run in December. Private consumption increased 1% month-over-month, adjusted for seasonality, its most significant advance in the last ten months. Gross fixed investment grew 2.7% in December as well, adjusted for seasonality, the most considerable increase over the previous 17 months.
Mexico’s inflation rose by a lower-than-expected 0.56% MOM in February to an annual inflation rate of 7.62% (vs. January's 7.91% YOY), raising hopes that the Central Bank interest rate tightening cycle will come to an end soon.
The private sector added 175,874 jobs in February, the second-best February recorded since the Mexican government began to track job creation 26 years ago. This is the eighth positive job report in the last nine months.
NEWS ABOUT MEXICO IN THE FOREIGN PRESS
Exclusive: Mexico's Pemex, 'punished' by markets, weighs how to pay heavy debt
08/03/2023, Reuters, Ana Isabel Martinez
Canada requests formal talks with Mexico on GMO restrictions -Bloomberg News
08/03/2023, Reuters, Staff
Is Mexico slipping into autocracy?
08/03/2023, Financial Times, Gedeón Rachman
Mexico’s peso hits five-year high on interest rates and US benefits
07/03/2023, Financial Times, Christine Murray
Survivors of deadly Mexico abduction returned to US
07/03/2023, The Washington Post, Alfredo Peña/ Fabiola Sánchez/ Travis Loller/ AP
Spying by Mexico’s Armed Forces Brings Fears of a ‘Military State’
07/03/2023, The New York Times, Natalie Kitroeff/ Ronen Bergman
Mexico hopes to avoid sanctions on vaquita's near extinction
03/03/2023, The Washington Post, Mark Stevenson/ AP
Tesla Mexico plant means $10-billion investment, Nuevo Leon governor says
03/03/2023, The Los Angeles Times, Maya Averbuch
Pemex Prepares to Go Green to Keep Bank Financing, Investors
03/03/2023, Bloomberg, Amy Stillman/ Michael O'Boyle