Latin Finance - March/April 2010 - 68

Mexico portfolio investment Staging a Comeback by Nacha Cattan n age-old Mexican practice of forecasting the year’s weather based on January temperatures, if applied to Mexican bonds, would portend dire drought in the peso corporate market. Not a single new domestic deal occurred in all of January. Conversely, Mexican corporate paper sold overseas beneﬁted from a downpour of o erings and re-openings In addition, companies with upcoming maturities are expected that hearkened back to pre-crisis days. They included Coca-Cola to reﬁnance. However, Credit Suisse notes a relatively light Femsa, which priced through the sovereign, Pemex, Urbi, Cemex, maturity schedule. Javer and Posadas. “A lot of investors [in overseas bonds] had been sitting on Fortunately, more modern methods can be employed to the sidelines with high cash levels and are happy to see anything foretell debt market issuance. But analysts, bankers and fund that crawls come out and o er paper. We certainly see an managers predict a slow improvement in liquidity,” recovery in 2010 for corporate says Sebastian Hofmeister, Afores Assets (pesos, billions) peso debt, riding on the coattails vice president at Moody’s in Steadily rising trend of mostly quasi sovereigns and the LatAm corporate ﬁnance burgeoning structured ﬁnance. group. Hofmeister warns, 1,300 Internationally, volume however, that investors could may struggle to hit last year’s become cautious as the space 1,100 estimated $11 billion in gets crowded and spread corporate and quasi sovereign compression potential lessens dollar deals after Pemex reduced versus last year. 900 its overseas and local ﬁnancing Recommendations for needs to $3.0-$4.0 billion corporate debt range broadly 700 from last year’s $7.8 billion from telecoms, housing and total, say analysts. It could also mining to banking. Credit 500 taper o in the second half of Suisse puts on its focus list for 2010 as volatility sets in due to 2010 telecoms Televisa, Telmex speculation over rate hikes. and Axtel, miner Southern 300 Meanwhile, IPOs may pick Copper – from which it predicts up. Luis Téllez, president of the new issuance if Grupo Mexico 100 stock exchange (BMV), said reﬁnances its Asarco acquisition 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 in January that around four – Banorte 2016 and 2021 notes, Source: Consar companies are working towards as well as high yielding Javer ﬂoating this year. Contributing to and Grupo Senda. improved conditions are high market multiples and cheap utility Deutsche Bank meanwhile tips Televisa in high grade. In highstocks, says Carlos González, equity analyst at Ixe. yield, the bank likes Alestra, Axtel, Cemex, Geo, Homex, Maxcom and Javer. Debut Borrowers Pemex bonds remain the driving force behind Mexican Last year’s trend of new names issuing debt in the dollar market corporate issuances, but their spreads in overseas markets lack the should carry into 2010. This is especially likely for consumer, > luster to attract EM investors, analysts say. At roughly 70-90 basis ﬁnancial and industrial sectors that were absent in 2009 and points over Mexican international sovereign bonds, Pemex dollar now in need of cash, says Brigitte Posch, EM portfolio manager at paper is not as attractive as its o erings in pesos or governmentPimco. issued domestic bonds, says Luis Flores, an economist at Ixe. Mexico’s overseas debt market has roared back to life, while corporate peso debt is still waiting for quasi sovereigns to bring it back from the brink. Beware rising interest rates. 68 LATINFINANCE March/April 2010

Latin Finance - March/April 2010

Table of Contents for the Digital Edition of Latin Finance - March/April 2010