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 Business News | February 2007 
Echoing Markets, Mexico Bolsa Dives
 El Universal
| | A shareholder is reflected on a display of a computer screen at a stock exchange market in Chengdu, capital of southwestern China's Sichuan province February 28, 2007. China's main stock index rose more than 3 percent on Wednesday, led by financial blue chips, a day after the market suffered its biggest fall in a decade. CHINA OUT (Reuters) |
The Bolsa fell 5.8 percent yesterday, its steepest one-day slide since 2000.
The losses followed a massive selloff in the the Chinese market, which dropped nearly nine percent and impacted markets in developing nations worldwide.
Tuesday´s decline came as part of a worldwide selloff after China´s government approved a special task force to clamp down on illegal share offerings and banned investments with borrowed money.
The index has fallen for four days from its Feb. 21 record, a drop that accelerated as a rout in Chinese equities reduced investors´ appetite for emerging market assets.
FROM PEAK TO VALLEY
The benchmark Bolsa index ended the day 8 percent below last week´s record peak.
José Miguel Garaicochea, manager of Mexico´s best-performing stock fund at Grupo Financiero Santander Serfin SA, said this year growth is likely to slow. He manages a total of USD$625 million in 10 funds.
"It´s going to be a lot harder," he said. "This year, there are questions again."
Garaicochea says the 10 percent decline he´s been expecting this year in the country´s equity market may be under way.
The Bolsa´s record this month increased the risk of another slide, he said, in the event of an interest rate rise or a setback in President Felipe Calderón´s effort to strengthen tax collection and control government pensions.
"Valuations are not as attractive now, and that could cause a correction at any time," Garaicochea said.
While the Bolsa has doubled since June 2005, it also has had six setbacks of at least five percent, including the one that started last week.
Alberto Rodriguez, head analyst at Grupo Bursatil Mexicano, said in a Feb. 8 report it would be hard for Mexican equities to rise much further.
"We continue to stick to the assumption that the Mexican Bolsa appears to be fairly valued as the market continues to reach new all-time highs," Rodríguez said in a research note.
DOMESTIC SPENDING
Garaicochea, who has a degree in public accounting from the National Autonomous University of Mexico, anticipates the biggest gains will come to shares dependent on domestic spending.
Walmex, as Latin America´s biggest retailer is known, will open a bank with branches in its stores this year.
Consumer credit hasn´t recovered to the levels that were seen before Mexico´s 1994 peso devaluation and economic crisis, Garaicochea said.
"To get back to the pre-1994 levels, we´d have to increase consumer credit by 30 percent a year for four years," he said.
Mortgage credit, auto loans and other forms of credit have been growing at about 35 percent a year, implying several good years for homebuilders and retailers, Garaicochea said. A Merrill Lynch study last year said mortgage and consumer credit provided by Mexican banks was growing at 47 percent annually.
"That becomes an engine for the economy," he said.
Santander had expected corporate profits for Mexican companies in 2006 to rise about 20 percent from the previous year.
They rose more, by about 28 percent in real terms, Garaicochea said. |
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