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July 2, 2009 • 1:42 am 1

Mexico: Needed or Unneeded Changes – July 2009 IXE – Banif Market Analysis

Indications are that a new beginning is on its way. US indicators point to the worst being over. The second half of the year starts with signs of a new beginning. The question is not if Mexico will start running when the starter pulls the trigger, but by how many months will it lag behind.

History is unable to repeat itself
Expectations are now that the Mexican economy will contract 8% in the 2Q09 (5.7% previously). Not even the likely improvements in house and car sales in the USA seem to help.  This is the largest slump since 1995, but recovery from that crisis was quick, as it only related to internal factors, so the strong growth of outer elements strengthened the patient.

This time things are not as easy. This time the only reason the outside world is not in as bad a condition as Mexico is because it caught a milder form of the flu. Although data released in the next few months should show 2Q09 as the worst period, this does not mean that from now on the Mexican economy will recover quickly, as production was down substantially and consumption only rose as people prepared for confinement because of the human version of the Swine Flu.

The government is doing all it can to reduce the pain, but the medicine is weak. It is reducing public spending but needs approval from Congress that is currently on summer holidays. Currently its main effort is on controlling the Peso at around P$ 13.00/US$. In addition, it is preparing for structural changes. The crisis that caught the world off guard demands it. Oil prices at US$ 150/boe (even if they did not stay there for long) led to the need for more efficient engines. Mexico does not have the experience to supply them and will need to adapt quickly, or lose ground at its economic base, the USA.

Starting the second half on first half results
July is the month when Mexican companies publish 1H results. Although we do not expect anything brilliant, we believe that some opportunities arise. The construction sector, which has lagged the market, will probably be one of the big winners from now on, as government incentives sink in.  We are staying out of the airport segment this month as we expect to see decreasing traffic data. This month we do not recommend any shorts.Download: Mexico – Monthly allocation – July 2009

Outperforming the IPyC
Stock – Catalysts/Fundamentals
AMXL – good 2Q09 earnings on a 17% traffic growth
AUTLANB – expected steel/ferroalloy price recovery
BIMBOA – will continue to show positive synergy gains from its recent acquisition
CEMEXCPO– expectations of a refinancing announcement in July
KOFL – strong performances of KOF and convenience stores
GEOB – will likely post the best report in the sector
GMEXICO – close to a l ruling on Asarco with creditors analyzing best offer in July
GRUMAB – expectations of positive operating results in 2Q09
IDEALB-1 – we believe that 2Q09 will show a 50% EBITDA growth
MEXCHEM – expected double-digit EBITDA growth
TLEVISACPO – strong 2Q09 coming from the consolidation of cables and advertising
WALMEXV – will continue to outperform peers with double-digit growth

Source: IXE & Banif, 01.07.2009

Filed under: BMV - Mexico, Exchanges, Latin America, Mexico, News, Services , , , , , , , , , , , , ,

• 1:31 am 1

Brazil: Winter Vacations – July 2009 IXE-Banif Market Analysis

The second half of the year starts with the Ibovespa above our YE09 forecast. This is mainly the result of foreign investors, who sought to gain a return on their capital in a world where a zero interest rate predominates. This means chosing stocks with very high daily volumes traded where there is a guarantee for investors of an exit as fast as their entrance. This being so, we start 3Q09 without changing our expectations for the year-end. We have therefore chosen a portfolio that is much more conservative than the ones we chose in previous months. We are also monitoring upcoming IPOs that, with Visanet’s successful allocation, should start cropping up, but at a more selective rate.

The Brazilian Central Bank meets again on July 22. Expectations are that this will be the last meeting this year in which it cuts interest rates. The Government remains more optimistic on the growth of the country for the rest of this year than does the market. To be sure, it did revise its estimates downwards in line with the World Bank but, unlike the World Bank and the majority of economists, it still forecasts a growth (0.8%), while others estimate a fall of around 1.0%. Data on the second quarter should point to a recovery, especially for personal consumption, but not enough to reverse the year’s negatives.

The appetite of foreign investors decreases
Foreigners have been the clear buyers in the Brazilian stock market during 1H09. Looking for some form of profit when interest rates in most countries are around zero, they invested their money in Brazil, enabling the Brazilian stock market to recover a good part of the losses it suffered at the start of the crisis. The question asked now is who will continue to maintain the good performance of the Brazilian stock market. Bets return to pension funds, but these have slowly increased the participation of stock in their portfolio from 10% three years ago to nearly 20% this year.
Profit taking should predominate. Download: Brazil – Monthly allocation – July 2009 Banif- IXE

Stock – Catalyst/Fundamentals
AMBV4 – Solid market share leadership, with an attractive FCF yield
BRTP4 – Greatest potential in the sector to increase in value
CSNA3 – Increase in ore sales to China
DURA4– Synergy gains from the merger with Satipel
ELPL6 – Should announce good dividends when publishing 2Q09 results
GOLL4 – July is a good month for air traffic
ITUB4 – Continuous growth in credit leads to better 2Q09 results
MMXM3 – Should announce new business deals in July
PCAR4 – Defensive business, with exposure to consumption and a high FCF yield
PETR4 – Should perform on a level with Ibovespa
VALE5 – Increase in the price of nickel caused by an increase in demand.

Source: Source:IXE & Banif, 01.07.2009

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, News , , , , , , , , , ,

• 12:51 am 0

Charles River:Driving FIX in LATAM

Buy-side buy-in and infrastructure improvements key to FIX success.

Extending from Mexico in the north to the southern tip of Chile, the LATAM region is home to 31 countries and dependencies and almost 570 million people. In its main urban centres, Mexico City, São Paulo and Buenos Aires, the FIX revolution  is making gradual inroads. Compliance and trade order systems’ experts, Charles River
Development, look at what LATAM needs to do to bring its electronic trading into the international arena.

Read full report: Charles River_Driving FIX in Latam

Source: FIXGLOBALMAGAZIN, June 2009

Filed under: Argentina, BMV - Mexico, Brazil, Chile, Colombia, Exchanges, FIX Connectivity, Latin America, Mexico, News, Trading Technology , , , , , , , , , , , ,

• 12:44 am 0

BM&FBovespa to go fully electronic; shutters open outcry floor

As of July 1, 2009, all BM&FBOVESPA transactions involving derivatives contracts based on financial assets and commodities in the BM&F segment will be carried out exclusively in the Exchange´s electronic trading system, which already accounted for over 98% of the 22 million contracts traded in that segment in June. The last open outcry floor session will close today at 5:15 p.m., followed by a ceremony to honor the professionals who worked at the floor.

Over the next few months, the area where the open outcry trading floor is located will be totally redesigned and included in the Exchange´s regular public visitation schedule, which currently utilizes the BM&FBOVESPA Space, where visitors receive information about financial market activities and instruction on how the stock and derivatives markets work. This new area will also be used to centralize the Exchange’s self-regulation activities.

Acknowledging the relevant roles performed by floor traders and runners in the development of the markets, BM&FBOVESPA has established two programs geared to the professionals who carried out these activities during the year of 2009.

The Professional Development Program will provide professionals with the opportunity of further improving their knowledge of capital markets, allowing them to participate free of charge in the presential, semi-presential and distance learning courses offered by the BM&FBOVESPA Institute of Education. The Incentive Program will provide professionals with a discount on the Exchange fee for transactions executed at the Exchange, in both of its segments, over a period of 24 months, as of January 7, 2009.

Technological evolution

The complete migration from the open outcry system to the electronic trading system is a response to market demand which mirrors the international trend towards the evolution of technological trading processes that has been taking place over the last two decades. The electronic trading system provides domestic and international investors with additional channels of higher quality access to the products offered by the Brazilian Exchange and stimulates greater market liquidity.

Pursuant to this improvement plan for the BM&FBOVESPA trading environment, up to the end of 2009, investors will be offered three differentiated levels of direct access to the market (DMA), including the co-location service, which will allow investors to place their own computer equipment inside the Exchange facilities. In addition, a single trading interface will be implemented, allowing end customers to execute transactions in both the BM&F and BOVESPA segments on a single screen.

The electronic trading system was implemented in the BM&F segment in 2000, when it accounted for just a little over 3% of the total number of contracts traded. By 2006 it had surpassed the open outcry system, ending the year with 57.59% of the total number of contracts traded. In 2007 side-by-side trading was implemented, allowing products to be traded simultaneously in the electronic trading system and on the floor. As a result the participation of the electronic trading system in the total trading volume reached 72.95%. That same year the Exchange reached the mark of 2 billion contracts traded.

Source: BM&FBOVESPA, 01.07.2009

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, News, Trading Technology , , , , , , , , ,

• 12:20 am 0

Tokyo takes time for Aim presence

Tokyo Aim, Japan’s newest exchange, is not escaping the scepticism that enveloped its London equivalent when that junior market was established nearly 15 years ago. The new bourse is a joint venture between the Tokyo and London stock exchanges and based on the LSE’s own Aim market.

The TSE hopes that it will build up a new set of companies that can eventually grow into some of Japan’s leading names, encourage more risk capital and make the Tokyo a more global financial centre through foreign company listings.

Atsushi Saito, TSE chief executive, has said the names of Japan’s top 100 companies have not changed much over the past half century, unlike in the US or Europe, and that Japan needs this “energy” to stay relevant. The LSE’s ambitions are about being part of the growth story in Asia and expanding its brand.

Sceptics question whether or not Japan needs another start-up market when it already has seven and also whether it can lure overseas companies to list on it.

“It is difficult to see what yet another market will bring to Japan if it is just another start-up exchange,” said Neil Katkov, head of Asia research at Celent, the finance research and consulting firm. “However, if they are looking for a niche to differentiate themselves, then it could be a different story.”

Tetsutaro Muraki, Tokyo Aim’s bilingual chief executive, is confident about that differentiation. He says the market is also targeting the subsidiaries of large-cap companies, overseas companies, fundraising for project finance and large unlisted companies that want to raise funds through preference shares.

It has received more than 100 inquiries, ranging from an e-mail to more serious communication, from companies both domestically and overseas.

He sees clean energy, technology and biotechnology as among the mainstays of the market.

Mr Muraki is in no rush, expecting about five listings in the first year, and he does not expect to break even for the first four or five years.

“I’d rather build a reputable exchange that grows over time, versus bringing a less qualified company to the exchange in the current market,” he said.

Tokyo Aim is restricted to professionals and overseas investors, unlike the main start-up markets, which Mr Muraki says are dominated by retail investors who can often be speculative by nature.

“The real issue is if Tokyo Aim can bring the companies that are interesting enough to investors for a long period of time,” Mr Muraki said. “It’s not a short-term type of trading that you often see on the Japanese growth markets.”

There is also a question mark over Tokyo’s presence as a global financial centre, in spite it having the second-largest stock market in the world.

Listings of foreign companies on the TSE have dwindled to a mere 15 from a peak of 127 in 1991. Now the question is how Tokyo Aim will lure in overseas companies.

It will face regional competition from the Growth Enterprise Board of Shenzhen, China, which is expected to be launched in the coming months, and other Asian bourses are unlikely to sit back and watch.

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SZSE Chinese bourse set to lure domestic flotations,Financial Times, 23.06.2009

To be globally competitive, disclosure on Tokyo Aim can be made in English and it also allows the use of International Financial Reporting Standards to encourage overseas companies to list on the market.

It is likely to attract those companies with business operations or customers in Japan as well as being attracted by the large pool of capital in Japan, Mr Muraki said.

David Shrimpton, chairman of Tokyo Aim and from the LSE side of the link-up, says: “There is a huge amount of capital in Tokyo and that creates a really powerful listing story for Asian regional companies, which we wouldn’t be able to provide on our own.

“My personal view is that we wouldn’t have been able to start this venture on our own and I don’t think TSE would have been able to either, which is why this is a joint venture.”

James Halstead, a partner at Morrison & Foerster in London, during a visit to Tokyo meeting Japanese nominated advisors said: “People were initially sceptical about London Aim, and it will probably be a similar process for Tokyo. The correct measure of its success, however, will be where the market is in five or ten years time not five or ten months.”

Source: Financial Times,30.06.2009 by Lindsay Whipp

Filed under: Asia, Exchanges, Japan, News , , , , , , , , ,