The seven-year bull run in Mexican stocks might be coming to an end.
Strategists and investors are tempering their expectations as corporate profits slide, economic growth slows and the U.S. presidential election rattles investors.
UBS expects a 10 percent drop in the IPC index by the end of the year. BTG Pactual cut its recommendation on Mexican stocks to underweight last week. Barclays says valuations are bound to fall.
This month, Mexico’s biggest stock ETF has seen the largest withdrawals in two years.
The increasingly bearish sentiment is closely tied to a rout in the peso that has made it the worst performing major currency amid prospects that Donald Trump will win the U.S. presidential election and make good on pledges to renegotiate trade accords.
While the peso has recovered from record lows, international investors have been hit hard in recent weeks. The IPC index has fallen 3.4 percent in dollar terms since the Republican convention, compared with a 5 percent gain in the MSCI Emerging Markets stock index.
“Things have changed and it makes it very difficult to predict where we might end up by year-end,” said Benjamin Theurer, an equity analyst at Barclays in Mexico City. “At the beginning of the year, I wasn’t considering Trump would actually make it to be a nominee. It’s going to be volatile.”
AP – U.S. Treasury Secretary Jacob Lew made a strong pitch for the Trans-Pacific Partnership trade pact during a visit to Mexico on Thursday. Lew strongly defended globalization, but acknowledged that “some industries, towns, and workers” in both the U.S. and Mexico “are feeling the stress of this change.”
AFR – Mexico’s central bank raised its benchmark rate 50 basis points to 4.75 per cent on Thursday, hoping to stem risks that a weak peso could fan inflation after a sell-off in the currency sparked by fears Donald Trump could win the White House.
ESPNfc – LA Galaxy forward Giovani dos Santos will return to the Mexico national team for upcoming friendlies against New Zealand on Oct. 8 and Panama on Oct. 11. In other surprises, Giovani’s brother Jonathan Dos Santos will also return for his first involvement since the 2015 Gold Cup, while Chivas striker Alan Pulido is back with the squad having been absent since the 2014 World Cup.
Reuters – Mexican cement maker Cemex said on Thursday it had launched a tender offer for up to $500 million in outstanding 7.250 percent senior secured notes due in 2021. The early tender date was Oct. 14, 2016, with a second tender deadline set on Oct. 27, 2016.
Clean Technica – The preliminary results of the much-awaited second renewable energy auction for Mexico were declared last week. Solar dominated, with more than half of the total amount of energy awarded to solar PV projects.
Mexico, long considered a free-market bastion in Latin America, recently carried out one of the region’s biggest government giveaways: a $1.3 billion program to hand out close to 10.5 million flat-screen television sets to the country’s poor.
The government touted the program, aimed at low-income mothers, senior citizens and other welfare recipients, as a model of social inclusion and the best way to push the country forward from analog signals into the digital age. The number of televisions given away was equal to twice the sets Mexicans normally buy in a single year.
But people with knowledge of the government’s mass purchase of the 24-inch digital TVs in 2014 and 2015 say the process was riddled with corruption in its latter stages, echoing a string of malfeasance and conflict-of-interest allegations that have rocked the administration of President Enrique Peña Nieto over the past two years.
Some contracts to purchase hundreds of thousands of TVs were awarded in no-bid procedures, and a high-ranking Mexican official asked for kickbacks during the process, according to people familiar with the situation.
“It was a fraud, a whole chain of corruption,” said a person with direct knowledge of the process.
LAT – They lug basics: shovels, machetes, hammers, a metal rod to test the earth, a portable canopy to block the broiling sun. Lucia Diaz and about 15 others head off in several pickups, passing a police guard and arriving at a mosquito-infested field where everyone sprays on repellent and dons masks and gloves for the grisly task ahead.
Their objective: human remains, long buried, now emerging from the earth, providing clues to unspeakable fates. Searchers on the northern fringes of Veracruz say they have uncovered at least 80 clandestine graves in the last eight weeks.
CNN – Donald Trump says Mexico isn’t playing fair on trade.He argues that Mexico sets a trade barrier on U.S. companies, but the same penalty isn’t applied to Mexican companies that sell in America.
His critics believe his latest comment is misleading. It is true that Mexico has a 16% value-added tax (VAT) that American companies must pay in Mexico. It’s also true that Mexican companies don’t pay a VAT tax in the United States.
However, Mexican companies do pay the same VAT tax in Mexico that U.S. companies pay. Trade experts say the VAT tax isn’t a trade barrier, or tariff, because local companies are paying the same tax in their home country.
BBC -The headlines earlier this week that a baby had been born using DNA from three people got the world very excited – no more so than in Mexico, where the technique was carried out. The doctors used a method that takes all the vital DNA from the mother’s egg plus healthy mitochondria from a donor egg to create a new egg that’s then fertilised with the father’s sperm.
While the little boy isn’t the first baby to be created by combining DNA from three people, the method used is a new and significant one that experts say could help families with rare genetic conditions to conceive healthy babies.
BBC – The remains of 10 US soldiers killed during the Mexican-American war are being returned 170 years after their deaths. The troops are believed to have been volunteers who fought during the Battle of Monterrey in Mexico in 1846.
WSJ – Mexico’s opening of its electricity market after decades of state control is driving fierce competition among suppliers of clean energy and pushing prices down, as renewable energies gain traction across Latin America.
Mexico’s government, following the launch this year of a wholesale electricity market under an independent system operator, this year held its first auctions in which companies made bids to sell renewable energy under long-term contracts to state-owned utility Comisión Federal de Electricidad, or CFE, starting in 2018.
On Wednesday, purchase contracts were awarded for 8.9 million megawatt hours a year of electricity from mostly solar and wind generating plants—equivalent to about 3% of Mexico’s current electricity use.
Fortune – The Mexico unit of SolarCity, the rooftop solar developer controlled by billionaire Elon Musk, aims to invest as much as $1 billion over the next five years. The projected outlay will depend on Mexico keeping at current levels an incentive known as net-metering that requires utilities to buy surplus power generated by rooftop solar panels.
DW – New figures suggest as many as 93.7 percent of all crimes go unreported or uninvestigated across Mexico. But general crime rates for 2015 were down 13 percent, although the number of murders rose sharply.
Bloomberg – Cisco Systems Inc. plans to spend as much as $4 billion in Mexico through 2018 to expand production, creating jobs in the country even as the American company cuts its global workforce by 7 percent. The spending will lead to the 270 new direct jobs and 77 related positions. The biggest maker of equipment that runs the internet plans to upgrade its factories and increase production through contract manufacturers.
Breitbart – The incidence of exorcisms and Satanic deliverance rites in Mexico has risen sharply in recent months, reportedly driven by the growth of the cult to Santa Muerte, a personification of death.
Fox News Latino – In the last seven years, approximately 4.2 million Mexicans have returned to their home country from the U.S. with an order of deportation. Of these, one out of four ends up bringing the entire family back to Mexico — or at least part of it. This explains why there are currently 498,000 U.S.-born minors living in Mexico, many of them Spanish illiterate and struggling to adapt to an entirely different school system.
OilPrice – Mexico’s energy secretary said last week at Rice University that the government could begin shale auctions at some point after March 2017, another step forward in the country’s historic opening up of its energy sector. Mexico is sitting on what many think are vast shale oil and gas resources in the north, which are thought to be extensions of the Eagle Ford shale in South Texas.
Xinhua – As the model of building Special Economic Zones (SEZs) has been successful internationally, especially in China, Mexico has decided to develop its own SEZs to boost its development. The goal is to attract investment and generate well-paid jobs across Mexico, said Gerardo Gutierrez Candiani, head of the Federal Authority for the Development of Special Economic Zones (AFDZE).