Weekly Mexico Market Monitor

Friday AM, December 16, 2022

Dec 16, 2022

MARKETS

The IPC index of Mexico’s top 35 stocks closed December 15 at 50,047.70 pesos, marginally down -0.6% from its December 8 close of 51,051.96. The 3.56% year-to-date decline in the IPC is still outperforming the S&P500 (-14.94% YTD).

The MXN/USD exchange rate closed at 19.73 pesos to the dollar December 15, down from 19.64 pesos on December 8. Banamex’s December 6 survey of 33 analysts maintained consensus view that the rate will climb to 20.0 by year-end. By the end of 2023, the exchange rate is now projected at 20.80 pesos per dollar, from the expectation of 21.00 in the previous biweekly survey.

The Mexican 10-year bond (2031) closed Thursday with the yield at 9.08%, up from 8.93%, on December 8.

The IPC Top Stock Gainers for the week were: HOTEL (+9.80%), CYDSASAA (+7.90%), and MEGA (+4.70%), and the Biggest Losers were: MEDICA (-9.10%), OMA (-7.80%), and VISTA (-7.70%).  

CORPORATE & MARKET NEWS

Grupo Televisa has proposed a merger between Izzi, its Pay-TV and fixed telecommunications arm, and its largest rival Guadalajara-based Megacable. Megacable rejected the initial proposal just one day later. Nevertheless, Televisa is saying it would still like to bring Izzi and Megacable together, and analysts are hopeful of an improved offer. The initial share-for-share agreement between the companies establishes that Megacable's stakeholders would own about 45% of the merged company plus one dividend and Televisa about 55%.

Agrofibra, became the first agri-food-focused real estate trust on Mexico’s most innovative stock exchange (BIVA) raising 976.8 million pesos in its initial public offering. The amount raised represents 16.2% of the more than 6 billion pesos the new trust had sought to start operations.

Grupo Bimbo is set to raise prices in Mexico Monday, December 19, in response to the higher prices for raw materials like wheat and energy. The multinational baker agreed to freeze its prices in May for six months, as part of the government’s strategy to combat inflation in the price of basic goods.

Betterware de Mexico, a direct-to-consumer home and organizational solutions firm listed in Nasdaq, announced a dividend payment of 50 million pesos for a yield of 0.8% in a year when the once high-flying stock has fallen from US$24/s to the current US$6.75/s.

Hoteles City reported another strong set of monthly occupancy and revenue figures in November, helping its stock continue the rally since the Marriot transaction. Occupancy rate reached 62.6%, above pre-pandemic levels, and its average daily rate rose by 14% YOY vs. 2019. Hotelera Santa Fe agreed to sell the Hilton Guadalajara hotel for US$59 million and buy a 50% stake in Mahekal Beach Resort in Playa del Carmen for US$56 million (50% financed with debt). Fibra Inn announced the sale of 3 hotels for MXN$100 million plus VAT.

El Puerto de Liverpool retail department store chain said it has been included in the Dow Jones Sustainability MILA Pacific Alliance Index for the first time. Agua’s shares will be part of the DJSI MILA Pacific Alliance for sixth consecutive year. The index lists issuers that have been positively reviewed on their environmental, social and corporate governance performance in Latin America.

Banco Santander formally appointed Felipe García as country head in Mexico, replacing Héctor Grisi. The change takes effect January 1, 2023. Grisi, in turn, was recently promoted to take over as Santander’s global CEO.

In the wake of its bankruptcy declaration, non-bank lender Crédito Real has reached a payment agreement with two creditors: the BlueOrchard Microfinance Fund and Mexican bank Ve por Más (BX+). Negotiations with other creditors are ongoing.

Monex joins the wave of companies delisting from the Mexican stock market, beginning their tender offer to purchase 30.8 million shares at 21.7 pesos per share, representing 4.94% of its outstanding capital stock.

In other Mexico corporate news... Chedraui bought Arteli, a 36-unit grocery chain in Tamaulipas. Arteli reported to have sales of about 5 billion. Alpek announced Jorge Young, President of Alpek Polyester, will take over as Alpek CEO from company veteran José de Jesús Valdez. Fibramq raised a US$150 million sustainable credit line. Vinte won two high impact investment awards from Environmental Finance. HSBC Mexico announced that its debit card holders will now be able to withdraw cash at the more than 20,000 OXXO stores in Mexico. German automaker BMW began production of the second generation of the M2 sports model at its plant in San Luis Potosí. Multiple media reports indicate Tesla is considering the construction of a plant in the state of Nuevo Leon and will announce plans in early 2023.

POLITICS

AMLO’s Plan B electoral reform was approved in the Senate with the support of Morena and its allies. This despite internal divisions in the majority party with Morena senate leader Ricardo Monreal creating tensions with the president over modifications and the general handling of the bill. Furthermore, Monreal voted against the initiative, which he described as having unconstitutional points, leading to a new dispute between the politician and President López Obrador. Within the initiative, the structure and reduction in financing of the INE was maintained, which puts the proper functioning of the electoral body at risk.

The Senate ratified the appointment of Andrea Marván Saltiel as commissioner of Cofece to occupy the fifth seat out of seven, ending the impasse due to AMLO refusing to appoint new councilors.

Miguel Barbosa Huerta, the MORENA governor of the state of Puebla, died at the age of 63.

Lawmakers in the lower house of Congress have voted unanimously in favor of increasing paid vacation days from 6 to 12 for workers who have completed at least one year of service. The bill will now be sent to the Senate, where it is likely to be approved next week.

TRADE & ECONOMICS

Banco de México’s Governing Board raised the target for the overnight interbank interest rate by 50 percentage points to 10.50%. The central bank governors said in the announcement that recent inflation prints have been lower than expected with growth stronger than expected in 4Q. The board added another rate hike will be necessary at its next meeting February 9, 2023, but “it will assess if the reference rate needs to be further adjusted” thereafter, suggesting a halt or at least pause in the hiking cycle that began April 2021, one that’s already tacked 650bp onto the reference rate.

Mexico's industrial production growth eased in October from a 14-month high in September, largely due to a slowdown in manufacturing output, according to data from the INEGI. Industrial production climbed a seasonally adjusted 3.3% YoY in October, slowing from the 4.2% increase in September.

Nearshoring in Mexico will benefit real estate trusts with higher occupancies and dividend growth, according to a report published by Monex Casa de Bolsa. Analysts estimated that industrial real estate investment trusts will have an occupancy rate of 97.5%, compared to 96.8% prior to the COVID-19 pandemic.

Monterrey topped the list of the most competitive cities for investment in 2022, according to the Mexican Institute for Competitiveness (IMCO). "Competitiveness is a compass that can help us. It is important that we take it into account not only because it has relevant indicators for society, but also because it can help us improve public policies," said Jesús Carrillo, director of Sustainable Economy at IMCO.

This year's Buen Fin totaled sales of 134.4 billion pesos, a 30% decrease when compared to the seven days that the sales campaign lasted in the 2021, when sales totaled 191.9 billion pesos. The decrease stems from consumer worries amidst high levels of inflation and increased interest rates, according to data from the Mexican Association of Online Sales (AMVO).

The Central American Bank for Economic Integration, a multilateral organization that grants loans to countries in the region, launched a 3-billion-peso social bond on Mexico’s BIVA, becoming the second social bond issuance by the CenAm development bank executed in Mexico. The funds are earmarked to help finance social projects that fall within CABEI’s wide-ranging development purview.

Mexico's government is ramping up efforts to regain its Aviation Safety Category 1 status, which it lost 19 months ago, a demerit that has become the nation’s top hindrance to expanding international flights.

The Mexican government proposed a 2-year extension on the import of GMO and transgenic yellow corn from the United States, seeking to avoid USMCA conflicts. The imported corn will be used exclusively for animal use and the decision to expand its purchases is intended to avoid a greater trade dispute, said AMLO in a meeting with the media.

NEWS ABOUT MEXICO IN THE FOREIGN PRESS

Top Mexican Journalist Survives Assassination Attempt in Mexico City

16/12/2022, Bloomberg, Juan Pablo Spinetto

Mexico’s Central Bank Matches Fed With Smaller Rate Hike

15/12/2022, Bloomberg, Max de Haldevang and Maya Averbuch

US-Mexico Energy Trade-Dispute Talks Stall Ahead of Biden Visit

15/12/2022, Bloomberg, Eric Martin

Peru summons its ambassadors in Argentina, Bolivia, Colombia and Mexico for consultations

15/12/2022, Reuters, Staff

López Obrador overhauls Mexican electoral system, sparking protests

15/12/2022, The Washington Post, Mary Beth Sheridan

Mexico's Pemex in talks with government for new debt support