MARKETS
The S&P / BMV IPC index rebounded 3.3% this week to close at 52,311.08 pts following the US equity indexes which rallied after Trump’s victory in the US presidential election and the reduction in the FED’s interest rate. The main domestic winners were in the industrial, cement financial and food sectors. The Mexican peso gained 1.2%, closing just below the 20 psychological barrier after a volatile week that saw it reach as high as 20.80.
The broader optimism more than offset the potential impact of Trump’s policies on Mexico, the Supreme Court’s decision not to challenge the judicial reform and the IFT’s announcement of new asymmetric regulations on AMX.
The S&P / BMV IPC’s top stock gainers for the week were: CEMEX CPO (+14.7%), rebounding after leading losses last week; GCC* (+12.7%) and ALFA A (+7.3%). The index’s biggest losers were: BBAJIO O (-5.8%), Q* (-4.7%) and TLEVISA CPO (-4.4%), which had led gainers last week.
Next week, Banco de Mexico’s monetary policy meeting will take place with analysts expecting a 25-bps interest rate reduction. The Mexican Government will release the 2025 budget package. The Consumer Confidence Index and Industrial Production will be announced.
LISTED COMPANIES
AMX announced it has received the IFT’s third bi-annual evaluation of asymmetric measures which include the incorporation of new obligations and the modification of existing ones. On the mobile side, these measures include obligations in terms of infrastructure sharing, no minimum terms in post-paid, and the obligation to unblock cell phones, among others. The company said it will challenge the IFT’s new asymmetric measures.
ASUR’s total passenger traffic fell 2.4% YoY to 5.3 million in October, driven mainly by an 11.7% reduction in Mexico, as airlines continue reduce capacity because of the P&W engine issues; this was partially mitigated by a 20.8% increase in Colombia and a 1.8% rise in Puerto Rico.
GAP’s total passenger traffic fell 0.8% YoY in October as a result of a 3.0% decrease in domestic traffic (Guadalajara -0.7%, Tijuana -3.2%, Los Cabos +2.3%) and a 2.8% increase in international traffic (Guadalajara +13.9%, Montego Bay -8.8% and Tijuana +1.9%).
OMA’s total traffic decreased 4.8% YoY in October, due to a 7.0% reduction in domestic traffic and a 12.7% increase in international traffic. The company also confirmed that the October 18th cybersecurity incident was a ransomware attack. The company is strengthening its security protocols, policies, and procedures
VOLARIS’ total passenger traffic declined 6.7% YoY to 2.5 million, mainly as a result of a 9.2% reduction in domestic traffic and a 1.3% increase in international traffic.
FEMSA has successfully completed the sale of its refrigeration equipment and foodservice operations, Imbera and Torrey, to Mill Point Capital LLC, for MXN$8.0 billion pesos, net of cash and debt. This transaction had been announced on July 17th, 2024.
FIBRAPL extended the tender offer period for TERRAFINA’s CBFI’s until November 8th under the same terms which include an exchange ratio of 0.58 FIBRAPL’s CBFI’s for each TERRAFINA CBFI.
ALPEK announced plans to cease production at its EPS Beaver Valley facility in Monaca, Pennsylvania, by January 2025. The site was built around 1940, and was acquired by ALPEK in 2020, with a nominal installed capacity of 123,000 tons of EPS, and represents less than 2% of Alpek’s total assets. The company will transfer most of its EPS production to other facilities.
GRUPO LACOMER opened a new “La Comer” store in Querétaro, which required a MXN$692 million total investment. With this opening, the company has 86 units throughout the country.
OTHER COMPANIES
Morena announced it will move forward with the proposal to eliminate the independent regulatory agencies which includes INAI, Cofece, IFT, Coneval, CNH, CRE and Mejoredu.
The credit portfolio of the Mexican banking sector grew 10.3% YoY (enterprises +11.6%, consumption +17.3%, financial institutions +10.4%, government entities -7.3%, housing +8.0%) in Sept ‘24, according to CNBV data. The NPL ratio stood at 2.06%, compared with 2.03% in Aug ‘24 and 2.15% in Sept ‘23. The sector’s capitalization ratio was 19.44% at the end of Aug ‘24 (no Sept figure was provided). The banking sector registered net profits of MXN$222.7 billion in Sept ‘24, up 8.4% YoY, which translated into an ROE of 18.59% in Sept ‘24, from 18.57% in Sept’ 23.
The Mexican Fintech sector lost MXN$1.4 billion in 2023, according to CNBV data. This included MXN$122 million from “Collective Financing Institutions” (IFC’s) and MXN$1.293 billion from “Institutions of Electronic Payment Funds” (IFPE’s).
NU MEXICO reported its weakest quarter to date in 3Q24, with losses before taxes of P$850mn, as both provisions for loan losses and absolute cost of deposits (on which the company continues to pay above reference rates) reached record highs. The performing loan portfolio grew a decent 8.5% QoQ (better than the 4.0% suggested by the seemingly preliminary Condusef-reported figures), but still well below the non-performing portfolio, which surged 25.9%. Moreover, while the company maintained an extraordinary performance in deposits, vastly outperforming peers, this came at a cost, as Nu Mx reported a record-low financial margin; meanwhile, the loans-to-deposits ratio declined to just 0.23x. While not entirely surprising given recent trends, this set of results does come as a contrast to bootstrapped fintech peers such as Klar, which reported last week it had reached monthly profitability. NU MEXICO announced the implementation of new features on its “Cuenta Nu” and its credit card product, which include cell phone recharges, an increase in the Credit Line under Cajitas savings, multiple virtual cards and temporary cards with automatic expiration and customized credit limits for virtual cards. Nu Mexico also reached an agreement with Financiera Bienestar under which its “Cuenta Nu” users will be able to make deposits and, in the future, withdrawals.
MG MOTOR plans to build a USD1.05 billion assembly plant in Mexico with production capacity of 100 thousand units per year. This investment includes USD450 million in infrastructure and USD500 million in equipment, according to Zhang Wei, president of MG MOTOR MEXICO.
AMAZON and JÜSTO announced an agreement under which JÜSTO will offer its products on AMAZON’s platform.
AEROMEXICO reached an agreement with ASPA, the pilot union, to increase salaries by 7.5% and other benefits by 12.5%.
TRUBIT, a Latin American cryptocurrency platform, and REAP, a global payment technology provider signed a strategic alliance to make cross-border payments between Latin America and Asia.
TRADE AND ECONOMICS
Inflation reached 0.55% in October, INEGI reported, which was slightly above the 0.52% consensus expectation according to the last Citibanamex Expectations Survey. The main drivers were the monthly increases of 1.73% in agricultural prices and 1.95% in energy ones. As a result, the last 12-month inflation rate accelerated to 4.76% (vs. 4.70% expected), from the last reading of 4.69% in the first half of October and 4.58% in September. The core inflation rate was 0.28% (vs. 0.32% E) in October, leading to a last 12-month core inflation rate of 3.80% (vs. 3.84% E).
Economists unanimously expect a 25-bps reduction in Banco de Mexico’s interest rate in its upcoming monetary policy meeting, according to the Citibanamex Expectations Survey. The median interest rate estimates for YE24 and YE25 remained unchanged at 10.0% and 8.0%, respectively. Economists also anticipate an inflation rate of 4.41% in 2024 (vs. 4.40% in the previous survey) and 3.81% in 2025 (from 3.80%). The core inflation forecasts stayed at 3.80% and 3.70%, respectively. The expected FX rate remained at MXN$19.80/USD for YE24 and was revised upwards slightly to MXN$20.21/USD (from MXN$20.10/USD) for YE25. GDP growth will likely be 1.5% and 1.0%, respectively, with no change compared to the previous survey.
Gross fixed investment decreased 1.9% MoM in real terms in August 2024 based on INEGI’s seasonally adjusted data. This decline was primarily driven by a 4.0% drop in construction expenditures (residential -6.4%; non-residential -1.3%), while investments in machinery and equipment saw a modest 0.6% increase. Within the machinery and equipment category, domestic goods rose 0.1% and imported goods 1.6%. Gross fixed investment fell 1.9% real YoY in August with original data. The construction sector experienced a significant 6.1% YoY decline, with residential construction falling 1.1% and non-residential construction decreasing 8.7%. Conversely, machinery and equipment investments grew 3.5% YoY, with domestic goods up 5.9% and imported goods 1.9%.
The Monthly Indicator of Private Consumption (IMCP) showed a 0.2% MoM increase In August in seasonally adjusted terms, driven by a 0.2% rise in domestic goods and a more significant 0.8% increase in imported goods. The IMCP experienced a 2.3% YoY growth according to original data, with domestic goods rising 1.5% and imported goods surging 7.3%.
Remittances declined 4.6% YoY to USD5.36 billion in September, Banco de México reported. This was the largest fall since June 2013, and the first contraction for a similar month in the last 12 years. However, the cumulative figure for the January-September period reached USD48.4 billion, up 2.8% YoY.
Light vehicle sales reached 122,051 units In October, representing a 7.0% YoY increase. Meanwhile, production grew 1.1% YoY to 382,101 units while exports rose 5.0% YoY to 332,356 units.
The unemployment rate remained at 2.9% in September, in line with last year’s figure, according to INEGI’s original figures.
Mexico’s exports to the US increased 11.7% YoY to a historically high level of USD44.155 billion in September, according to the Census Bureau. Mexico had a 15.4% share of exports to the US, follow-ed by China with 15.0% and Canada with 12.1%.
Hacienda and Banco de Mexico announced that the IMF completed the mid-term review of the USD35 billion Flexible Credit Line (FCL) granted to Mexico in November 2023 for a period of two years. The Executive Board’s assessment highlighted that Mexico continues to meet all the eligibility criteria necessary to access the resources available through this instrument, if required and without conditionality from the IMF. The IMF noted that Mexico has a sustained track record of implementing sound macroeconomic policies and continues to have very strong economic fundamentals and institutional policy frameworks.
Secretary of Energy Luz Elena González announced the National Energy Plan which is aimed at guaranteeing affordable electricity rates for the population, the strengthening of the CFE and generation through alternative sources. The Plan will include USD23.4 billion in electricity infrastructure investments during the current Presidential period which includes USD12.3 billion in generation to increase capacity by 13,024 MW, USD7.5 billion in transmission, and USD3.6 billion in distribution. The CFE will have a share of at least 54% of the country’s electricity production while the private sector’s share was limited to the remainder 46%. Secondary laws will likely be enacted in 1Q25.
CETES auction: 28-day CETES -10bps at 10.10%; 91-day CETES -5 bps to 10.48%; 174-day CETES -11bps to 10.53% and 693-day CETES -18 bps to 10.77%.
Download PDF: MIMxMktNov7-2024