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Mexico: Economic recovery slowly materializing – April 2010- IXE-BANIF Monthly Analysis

We are increasingly positive on the Mexican market, although we await further hard data to confirm our expectations. We see many indications of a recovery, which are already reflecting on the local stock market. However, we believe that the continuation of a positive news flow might support further appreciation.

We continue to base our portfolio strategy on specific catalysts for the companies we find attractive. First quarter results have already started to influence some of our choices. For April, we maintained the core of our March portfolio, with weight unchanged for America Movil, Cemex, Genomma LAB, Grupo Mexico, Mexichem and Walmex, which together account for 70% of our portfolio’s total weight. For the remaining 30%, the changes were the inclusion of Femsa, Penoles ICA and Tlevisa, a reduction in weight of ARA and the withdrawal of Autlan, Axtel and GEO.

Our estimated GDP may need another upward revision

Recent statements from the Finance Minister suggest that the Mexican economy might grow 5% in 2010, while the official government estimate remains at 4.2%. If hard data confirm this trend, we might find our own 4.1% growth estimate demanding a further upward revision, although we increased our figure just last month. Recently released statistics, such as the creation of new jobs, the reduction in the rate of unemployment to 5.3% from 5.9%, and industrial production growth, support this economic strength. Expectations are for local consumption to recover, and demand in the US for Mexican products has already begun increasing.

Additionally, data released for February show that vehicle sales grew nearly 100% YoY.

Expectations for interest rate and inflation remain unchanged

Expectations for interest rates, currently at 4.5% pa, continue unchanged, as we continue to foresee increases of 0.25% applied only in September and in October. This is in line with expectations for 2010’s inflation, which we continue to estimate at 4.94%. S

See detailed Detailed Market Analysis Report – April 2010

Source: IXE Banif, 01.04.2010

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