Risk aversion at international level should be the tone of the market, as seen last month. Investors should maintain their conservative stance, carefully cherry picking. While Mexico last month presented better than expected GDP figures for 2009 (down 6.5% YoY), inflation keeps trending up and interest rate should move higher, but we do not believe until 2H10 in a prudent and gradual pace.
We set our strategy for the suggested portfolio in March based on specific stock catalysts rather than on sector or top down view. We maintained a high weight on America Movil (AMXL) and GMexico (20% each) and included Autlan and Mexichem. AMXL is still underperforming the IPC and it has been showing a weak performance since it announced the corporate restructuring process involving CGT and TII. We believe the key short term catalyst is the disclosure of details and amount of synergies with this deal. GMexico was strong last month and we expect the uptrend to continue this month. We expect Autlan to present very good sales performance and prices should pick up, given the steel sector recovery worldwide. As for Mexichem, we expect margins to improve as it is entering the chlorine market. See more details of each stock catalyst and risks on pages 02 and 03.
Revising our GDP growth estimate to 4.1%, from 2.9%
After the release of better than expected GDP figures for 2009, despite a contraction of 6.5% YoY, we revised our estimates for 2010 upwards. We now project a GDP growth of 4.1% for Mexico in 2010, versus our previous forecast of 2.9%. We expect improvement from exports, especially services and we highlight the stronger than expected recovery in 4Q09, on a quarterly basis.
Inflation & interest rates to trend up
While annual inflation already suggests it is time to start implementing a more severe monetary policy, we believe the Central Bank will only change interest rates if there are concrete signs that the output gap is closing and idle capacity is close to historical highs. Inflation has been affected by local prices of fuel, electricity and public transportation; hence higher interest rates would not be efficient to bring it down towards the yearend goal. While the market consensus point to a hike already in July/10, we see a more gradual and prudent pace starting at a later time. We do not anticipate higher interest rates on the meeting on March 19. We believe it should remain at 4.50% this time, but increase to 5.50% until yearend.
Read full report Mexico – Monthly Allocation – March10
Source: IXE, Banif, 01.03.2010
Filed under: BMV - Mexico, Exchanges, Latin America, Mexico, News, Risk Management, Banif, BMV Bolsa Mexicana de Valores, Exchanges, Index, Investment, IPC, IXE, Latin America, Market Analysis, MexDer, Mexico, Performance Report
