Weekly Mexico Market Monitor

October 20, 2023
5:02 pm

Weekly Mexico Market Monitor

Friday AM, October 20, 2023

MARKETS

The FTSE-BIVA index closed on October 19 at 1,010.67 down slightly from its October 12 close at 1,029.47.

The MXN/USD exchange rate weakened to 18.28 pesos to the dollar on October 19, from its close of 17.98 pesos on October 12.

The Mexican 10-year bond (2031) closed on Thursday with a yield of 9.991%, slightly up from a yield of 9.804% on October 12.

The FTSE-BIVA Top Stock Gainers for the week were: OMA (+4.44%), FIBRAPL (+3.85%) and FIBRAMQ (+3.63%) and the Biggest Losers were: TELEVISA (-15.53%), BOLSA (-9.11%) and GENTERA (-8.81%).

CORPORATE & MARKET NEWS

The Mexican branch of the Brazilian fintech Nubank announced that it will be requesting a banking license from local regulators. Compared to its current SOFIPO license, this will allow the bank to offer a more diverse range of investment options to its customers, alongside higher deposit limits and direct deposits of salaries. Stori, another SOFIPO fintech, announced an eye-catching deposit account to offer annual yield of 15% but limited to P23,000 monthly deposits.

Mexico’s government said it reached an agreement to establish new lower tariff regulation bases for the Southeast (Asur), Pacific (GAP) and North Central (OMA) airport groups, following a review of the fees they pay for their concessions. Further, the airport contributions applicable to these three public airport managers will increase from 5% to 9% of their gross income. Stocks had fallen sharply on the original news but recovered somewhat as moved towards to a negotiated settlement.

FUNO’s industrial carve-out, NEXT, published its prospectus. Initially, it will have 6.8 million m2 of GLA, with 89% being FUNO properties and 11% from Jupiter portfolio (given by the El-Mann family), with ~US$ 457 million in rent. After the deal, NEXT’s debt is likely to be ~US$ 3.0 billion, including some of FUNO’s current debt.

Elon Musk said Tesla may delay its much-heralded $5 billion investment in Mexico due to economic uncertainty.

Alsea is investing $200 million pesos to remodel 30 of its 243 branches and plans to allocate another $280 million in 2024 to modernize 40 additional restaurants. The new formats include take-away food, specifically designed for office workers, with an average ticket of $180 pesos.

Two companies from China, both Tesla suppliers, will set up operations in Nuevo León. Ningbo Tuopu Group will invest US $700 million, while Hesai Technology will invest another US $260 million. The former manufactures shock absorption components, the latter light sensors for autonomous vehicles. The two investments should generate some 14,000 jobs.

Levare International Limited, of Dubai, started production of submersible pumps in its new factory, located in El Carmen, Nuevo León. It has invested $1.5 billion pesos in the plant; these types of pumps are used in the oil and mining industries.

Trina Solar, a Chinese company dedicated to the manufacture of photovoltaic products and systems (power plants) and solar energy storage, will invest between US $700 and $1 billion in Nuevo León.

Also in Nuevo León, another Chinese company called Lingong Machinery Group is developing an industrial park in which 120 companies are expected to be installed and usher in investments of close to US $5 billion. The project is expected to begin construction before the end of the year.

Grupo Vivescia, a French agri-food company, opened a malt production plant in Meoqui, Chihuahua. It is an investment of €112 million, which seeks to shorten the supply chain with its own suppliers, and also to its customers – right next door is a Heineken plant.

Kawasaki, a manufacturer and distributor of powersports vehicles such as motorcycles and ATVs, is investing US $200 million to develop a plant at the Monterrey Interport.

As third quarter reporting began, América Móvil reported a drop of 88.7% in its quarterly net income, from MXN $17,969 million in 3Q22 to MXN $2,028 million this quarter. Corn-based food producer Gruma beat expectations in the third quarter of 2023, increasing its EBITDA by 34% during the period, 11% more than the Infosel consensus analysts’ estimates. Revenues also increased by 18%. A further food industry success came from Grupo Herdez, which increased its EBITDA by 37% in the third quarter of the year while reporting a net sales increase of 13%. Nemak, the aluminum auto parts manufacturer, had its revenues increase by 4.4%, in line with the consensus of analysts consulted by Infosel, while EBITDA was 4.6% higher than in the same quarter of 2022. Hoteles City Express had a mixed quarter following the sale of its brands to Marriott, as third quarter Adjusted EBITDA decreased by 18.9% to $219.6 million pesos, however revenues increased by 4.8% year-over-year and the Company’s net debt decreased 32.1% versus 4Q22. Fibra Prologis released the results of a strong quarter, where occupancy was at 98.4 percent, and net income per Real Estate Trust Stock Certificate for the third quarter was Ps. 6.1356 pesos (US$0.3609) compared to Ps. 0.5491 pesos (US$0.0273) for the same period in 2022.

POLITICS

President Andrés Manuel López Obrador appointed the former Undersecretary of Hydrocarbons, Miguel Ángel Maciel Torres, as the new head of the Ministry of Energy. He will replace Rocío Nahle, who will run for Governor of Veracruz.

A recent poll by Buendía & Márquez for El Universal showed that Omar García Harfuch leads the 4T preferences for CDMX, ahead of Clara Brugada by 12 points. While in the Frente coalition, Margarita Zavala is leading the pack (14%), ahead of Santiago Taboada (10%) and Sandra Cuevas (10%).

TRADE & ECONOMICS

Retail sales indicate Mexico’s economy is slowing. In August, Mexico’s retail sales dropped by 0.4%, but were still 3.2% higher than last August. Overall, sales from the start of the year till August have increased by 4.5% compared to the same period last year, which is less growth than the 7.2% seen in 2022. Meanwhile, Mexico’s economy grew by 0.21% in September with respect to August, and 3% annually, according to the Timely Indicator of Economic Activity (IOAE) of the Inegi. For the month, secondary or industrial activities grew by 0.33% while the services sector rose by 0.15%

Foreign investors’ holdings of government securities registered a slight decrease of 0.09% this month, bringing total investment to 1.673 trillion pesos. This amount represented 14.9% of total outstanding securities in September, which is the lowest level since July 2010, when the share was 14.4%.