Latin Finance - May/June 2010 - 32

mexico capital markets

divided congress has made advancing There is a history of skepticism on this legal, structural and fiscal changes very subject. The idea that there will be revival challenging, and there are state and local in Mexican IPOs – there were just two elections set for May and June. deals in 2008 and none last year – is an “On a structural level, one of the key eternal hope. A significant regulatory risks for Mexico is the medium-term change may help this become a reality. reform agenda for the fiscal, in terms of the Afores can now buy individual listed revenue generation,” says Pimco’s Rahman. Mexican equities that are part of an Fiscal and debt dynamics are very good at approved index and meet minimum the moment relative to other EM countries, liquidity levels, allowing them to engage though there is the risk that either would in stock picking for the first time. Also, be unsustainable without needed reform. the value at risk limit the regulator places Along with a “double dip” in the US, on the funds is able to adjust with market political issues and lack of reform are volatility. This aims to reduce the funds’ the major risks for investors in Mexico, pro-cyclicality in crisis periods such as the Rahman adds. Specifically, making the end of 2008, when many funds had to sell tax system and Pemex each more efficient off assets at depressed prices or ask for in generating revenue to fund Mexico’s special permission to exceed the risk limit Fiscal reform risk: Rahman budget. in order to hold onto them. skepticism. Brazil, Latin America’s most “There is hope for some reform in the “This is an important moment,” says active market, provides only a small long term, but this year it will be difficult,” Javier Artigas, strategic planning director bit of encouragement. The market is says MetLife’s Pin. He adds that investors at the Bolsa Mexicana de Valores. “This open for new issuers, but transactions would welcome it, but do not expect it this year could be significant for large and have struggled, particularly IPOs. As of year, noting that he expects significant medium-sized companies,” he adds. mid-April, none of the debut issuers had improvements over a 10-year horizon. Artigas predicts two IPOs in 2010 achieved even the bottom of their targeted “There is confidence in the solvency from large companies, and 4-5 from of the public finances, but there could be mid-caps. This type of issuer is crucial, he price ranges. Follow-ons have fared slightly better. more efficient fiscal means to meet the explains, as there are a lot of them, their budgetary needs,” says Gerardo Rodríguez, success is crucial to the country’s growth, Mexico’s deputy undersecretary for public and they have thus far found it difficult to Not Without Longer-Term Risks Even if Mexican markets can reanimate, credit. “This year there is a political cycle, access funds. there is still a need for reform. The so we will see if we are able to advance There are already signs of mid and the discussion in this small-cap activity. As of environment.” mid-April, retailer Grupo “Right now Comerical Chedraui Mexican Bolsa and Bond Spreads developments in the global was preparing an IPO Coming back markets, such as Greece that would raise about 150 40,000 and Dubai, seem to have 4.85 billion pesos if taken precedence over more priced at the middle 140 country-specific factors,” of its expected range. 35,000 130 says Rahman, asked in Developer Tres Marías and February if the violence grower Proteak were also 120 is as big of a concern to preparing IPOs expected 30,000 investors as it was last year. to each bring in less than 110 “Though the security issue $100 million. 100 is something we would “It will depend on the 25,000 be concerned about if it investors, but I think this 90 elevated once again.” year we will have appetite Floating AAA spread 80 Pin adds the Drug Wars for new equity,” says 20,000 are something that are Cano, adding that there IPC index 70 present in everyone’s mind, could be between 5-10 but not something he sees IPOs this year. 15,000 60 Jan-2009 Apr-2009 Jul-2009 Oct-2009 Dec-2009 Mar-2010 slowing the markets or History and trends the country’s investment elsewhere in the region Source: BBVA Bancomer climate. LF may offer reasons for
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32 LatinFinance

May/June 2010

Latin Finance - May/June 2010

Table of Contents for the Digital Edition of Latin Finance - May/June 2010