LatinFinance - January/February 2018 - 21

CAPITAL
MARKETS
MEXICO

Mexico will have a second stock exchange in 2018, with promises to unlock
fundraising options for more businesses in the country. But skeptics wonder if
forming a new market is enough to usher in a tide of IPOs. By Amy Guthrie

An alternative
exchange

or decades, the Bolsa Mexicana de
Valores (BMV) has been an iconic, almost
untouchable symbol of Mexico's financial
markets. The stock exchange took shape
in 1975, when the country's three regional
markets in Mexico City, Guadalajara and
Monterrey merged as one. Since then, it has
operated as a near-monopoly.
But competition is on the horizon. A
second Mexican stock exchange, the Bolsa
Institucional de Valores, or BIVA, is slated
to start operations in early 2018.
"BIVA has been a disruptive project,"
says CEO Fernando Pérez. "The goal is to
generate competition in the sector. Markets
develop when competition arrives."
The local private equity firm LIV Capital
has invested 450 million pesos ($23.5 million) in the new exchange, with the option
to put in another 250 million pesos. BIVA
has also received funding through a private
placement with four Mexican pension
funds.
The project has cleared regulatory
hurdles and conducted an aggressive marketing campaign with brokerage houses
and prospective issuers. Nine brokerages
are testing the network and another 16 are
expected to join.
"We had to demystify the market. It had

an untouchable halo," Pérez says.
BIVA has had "cordial communications"
with BMV, Pérez says. The two stock markets are slated to have a dedicated communications channel between them, sending
closing prices and advising each other if
trade is suspended for a specific issuer.
"At the end of the day, a stock exchange,
as sexy as it is, is just an electronic platform
for negotiation," Pérez says.
Increasing issues
BMV's press office did not respond to requests to comment for this article. But BMV

of stock issuers by a third in three years - 147
companies are currently listed - while boosting daily operating volume by as much as 50%.
Jitters over threats from the US President
Donald Trump to scrap the North American
Free Trade Agreement (NAFTA) have made
it difficult to attract new companies to the
Mexican stock market. The tequila distiller
José Cuervo and the financial group Banco
del Bajío carried out IPOs in 2017, but the
retailer Grupo Axo abandoned plans for an
equity offering in May, and the local division
of the Spanish construction group OHL and
the corn flour producer Grupo Industrial

Losing weight
Market capitalization as a percentage of GDP (in Mexican pesos)
2016

2015

2014

2013

2012

Amount

MXN7.27tn

MXN6.95tn

MXN7.08tn

MXN6.89tn

MXN6.82tn

% GDP

37.1%

38.9%

41.5%

42.9%

43.4%

Source: BMV

CEO José Oriol Bosch voiced concern at a
June press conference that a second stock
exchange could "cannibalize" the market
by picking off would-be issuers.
New issuers will be required to pick a
listing on one or the other exchange, so they
do not make it too expensive to raise funds
in the equity capital markets.
BIVA aims to target listings by small- and
medium-sized companies, or SMEs, with
sales between 500 million pesos and 1 billion pesos, looking to increase the number

Maseca are both looking to exit the market.
The market capitalization of publiclytraded companies in Mexico has declined
to 37% of GDP in 2016 from 43% in 2012,
according to the BMV's last annual report.
In comparison, the market cap of listed
companies in Chile equaled more than 80%
of GDP in 2016. Chile has more than one
stock market.
Dueling exchanges
Mexican securities industry association
January/February 2018 - L ATINFINA NCE.COM 21

http://www.LATINFINANCE.COM

Table of Contents for the Digital Edition of LatinFinance - January/February 2018