Mexico Investment Guide: Mexican Stocks And ADRs

Mexico was in the international headlines for all the wrong reasons last year after the deadly outbreak of the H1N1 flu virus that sparked a global pandemic closing schools and businesses for two weeks in the country. The outbreak not only resulted in a big drop in tourism revenue of Mexico but also came as a major blow to the Mexican economy that had been already gripped by the effects of the global financial crisis. Mexico's capital market activity has hence slowly picked up from the lows of 2009 and is slowly but surely moving towards an economic resurgence. Testimony to the fact is that the Mexican economy has rebounded in the first quarter of this year, expanding more than 4 % from a year earlier after contracting 2.3 % in the last three months of 2009. With as many as six Mexican companies looking to go public this year, a rise in the Mexican IPO activity might just be the catalyst for speeding up the country's economic growth. Private-sector economists believe that Mexico is likely to grow at 4.2 % this year resulting in a strong rally in the BMV’s benchmark IPC index, which hit an all-time high of 34,134 points on April 15. During the past 12 months, the index has gained almost 50 % in value.

Before discussing the possibilities of investing in Mexico or including Mexican stocks in your investment portfolio, its important to understand the new dynamic changes at the Bolsa Mexicana de Valores or the Mexican Stock Exchange after it successfully offered its shares to the public and became a listed company on 13 June 2008. More than 13,600 individual investors bought shares in the IPO, making BMV a widely held public company. BMV (the company) trades on the Mexican Stock Exchange under the ticker code BOLSAA for it’s A shares. BMV is an actively traded stock, and from 1 February 2009 its A shares were included in the BMV's own IPC index of the top 35 Mexican stocks for the first time.


Overview Of The Mexico Stock Exchange:

The Bolsa Mexicana de Valores, also referred to as BMV or the Mexican Stock Exchange, is the chief stock exchange in Mexico. Located in Mexico City at Paseo de la Reforma, BMV is a private limited company. Shareholders of Mexico's stock exchange are all brokerage firms. BMV trades in debt instruments such as CETES (Federal Treasury Certificates); investment unit bonds, BONDES (federal government development bonds); Bankers acceptances, development bank bonds, warrants, debentures, stocks, mutual fund shares and so forth. The BMV-SENTRA Equities System allows for trading to take place electronically.

The Mexican Stock Exchange deals with 13 indices of stock prices. The IPC or Índice de Precios y Cotizaciones is the benchmark stock index and is the widest indicator of the stock market's complete performance. A number of companies are listed with the Bolsa Mexicana de Volores. Amongst the top companies on Mexico's Stock Exchange are Cemex (cement maker); América Móvil (wireless communications); Telmex (telecommunications); Televisa (media) and Grupo Corvi (consumer products distribution).

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Investing In Mexico: The Vibrant Latin American Economy

For years the most prominent feature of Mexico has been its exotic cuisine with all its varied flavors, colorful decoration, and variety of spices while investment options were never taken seriously. Investors for long have viewed other Latin American economies like Brazil and Argentina with more interest discussing plans possibly sitting in a restaurant serving Mexican cuisine. While Mexico doesn't quite enjoy the celebrity status of rival Brazil, there is no denying the fact that the country is undergoing something of an economic renaissance. With its last financial crisis more than 10 years behind it, Mexico is enjoying record foreign currency reserves and an investment-grade debt rating, thanks to much-improved fiscal discipline. It even boasts several companies listed on the New York Stock Exchange or NASDAQ and dozens of others that trade over the counter. Money managers are especially keen on stocks in the residential construction business as more and more Mexicans qualify for loans to build their own homes.

• The Mexican economy rebounded in the first quarter of this year, expanding more than 4 % from a year earlier after contracting 2.3 % in the last three months of 2009.

• Mexico’s international reserves reached a record $95.7 billion in March. The oil and manufacturing sectors are showing strong improvements and Mexican exports increased by 39% in March relative to March 2009.

• The automotive industry, one of the most important industries in the country, is recovering strongly with production and exports up in the first four months of this year. The unemployment rate in the first quarter stood at 5.3%.

• Rich in farmland, silver and copper, Mexico is the world’s 11th largest economy and is known for being a free trade economy that is heavily geared towards exports. Mexico’s trade is based on free trade agreements with more than 40 countries, including Japan, Israel, EU and various Central and South American countries.

• Mexico provides security and legal protection for foreign investors through Bilateral Investment Treaties (BIT’s) negotiated with 24 countries and a skilled and competitive labor force.

Mexico’s peso has been a major gainer against the dollar in recent weeks as an economic recovery in the U.S. fuels demand for the Latin American nation’s exports. Mexico’s economy is looking at a 5% growth rate as it recovers from the recession this year. The official forecast is set at 4.1%. With as many as six Mexican companies looking to go public this year, a rise in the Mexican IPO activity might just be the catalyst for speeding up the country's economic growth. There are a number of ways to include Mexico in your investment portfolio. Here is a list of some the best performing Mexican ETFs.


Top 7 ETFs To Invest In Mexico

MSCI Mexico Index Fund (EWW): The index measures the performance of the Mexican equity market.

EWW Top Ten Holdings

1. America Movil S.A.B. de C.V. (AMXL): 23.66%
2. Wal-Mart De Mexico SAB de CV (WALMEXV): 9.09%
3. CEMEX SAB de CV (CEMEXCPO): 6.62%
4. Grupo Mexico, S.A.B De C.V (GMEXICOB): 4.94%
5. Grupo Televisa SA (TLEVISACPO): 4.67%
6. Fomento Económico Mexicano, S.A.B. De C.V. (FEMSAUBD): 4.67%
7. Telmex Internacional S.A.B. de C.V. (TELINTL): 3.74%
8. Grupo Financiero Banorte, S.A.B De C.V. (GFNORTEO): 3.61%
9. Telefonos de Mexico,S.A.B. de C.V. (TELMEXL): 3.34%
10. Carso Global Telecom (TELECOMA1): 3.12%

Expense Ratio: 0.52%

EWW Sector Breakdown

Telecom 34.88%
Industrial Materials 21.21%
Consumer Goods 13.59%
Financials 11.48%
Consumer Services 10.25%
Media 5.09%
Business Services 2.82%
Health Care 0.39%

Mexico Fund Inc. (MXF): The Mexico Fund, Inc. (the Fund) is a closed-end, non-diversified management investment company. The Fund's investment objective is to seek long-term capital appreciation through investment in securities, primarily equity, listed on the Mexican Stock Exchange. The Fund may invest in Mexican fixed-income securities and bank time deposits of Mexican banks.

Top 10 Holdings

America Movil, S.A.B. de C.V. 19.23%
Wal-Mart De Mexico SAB de CV 10.46%
Grupo Mexico SA De CV Gmexico 7.54%
Grupo Televisa SA 4.99%
Fomento Económico Mexicano, S.A.B. De C.V. 4.21%
Kimberly Clark de Mexico SA de CV 4.04%
GPO BIMBO SAB 3.75%
Cemex S.A. 3.74%
Mexichem, S.A.B De C.V 3.74%
Grupo Financiero Banorte, S.A.B De C.V. 3.33%


Total Expense Ratio: 1.72

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