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 Business News | March 2007 
Mexico Stocks Slammed By Global Equity Sell-Off
 Reuters
Mexico City - Mexican stocks fell sharply on Monday, slammed by an ongoing global equity sell-off, while the peso firmed as investors worried less about inflation and snapped up government bonds.
The benchmark IPC stock index shed 2.02 percent at 25,788.37 points. The peso firmed 0.37 percent for a close of 11.1765 per dollar in local trading.
Last week, Mexican equities had their worst week since June, tumbling 7.7 percent after a plunge in Chinese equities and a strengthening yen led investors to dump risky assets worldwide.
The rout continued on Monday, leaving the IPC index 2.5 percent in the red for the year as bourses in the United States, Europe, Latin America and Japan closed lower.
"People still expect the correction could be a little deeper," said Francisco Rivero, head stock analyst for Mexico at Santander in Mexico City.
In a choppy session, Mexican shares opened sharply lower, but then briefly rallied into positive territory after a survey by the Institute for Supply Management showed the U.S. service sector expanding in February, albeit at a slower place than expected.
Mexico sends nearly 90 percent of its exports to the United States and U.S. investors are big players in Mexican markets, so good news for the U.S. economy is usually seen as good for Mexican companies.
Global investors have been dumping risky assets like equities since last Tuesday, when the Chinese stock market dropped 9 percent. The Japanese yen has also been strengthening sharply, forcing investors to sell-off risky assets they funded with borrowed yen, a low yielding currency.
The peso, meanwhile, got a boost from an increase in demand for long-term local currency bonds as investors bet inflation would cool by the end of the year.
The central bank's monthly survey of analysts on Thursday showed inflation expectations under control, analysts said, pushing bond prices up both Friday and Monday as investors bet the central bank will not have to hike interest rates soon.
The central bank predicts inflation will slow in March, but has warned it will hike interest rates if it doesn't.
"The whole world thinks inflation is well in line with what the central bank expects, and that is putting markets a little more at ease," said a currency trader in Mexico City.
The price on Mexico's benchmark 10-year peso bond rose 0.254 for a yield of 7.88 percent. The benchmark 20-year note rose 0.537 in price for a yield of 7.97 percent. Bond prices move inversely to yields.
In stock trading, dominant cellphone operator America Movil gave up 2.36 percent to 23.58 pesos. Its New York traded shares were off 2.5 percent at $42.10.
Leading retailer Wal-Mart de Mexico shed 1.17 percent to 43.09 pesos.
Miner Grupo Mexico slipped 4.58 percent to 44.55 pesos. |
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