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The low economic growth expected for Mexico this year will have its impact on the development of the country’s stock exchanges, explained analysts, for which they anticipate a 2022 with lower performance compared to 2021, when the Price and Quotation Index of the Stock Exchange Mexicana de Valores (BMV), closed with its highest increase in more than a decade.

On January 25, the International Monetary Fund (IMF) cut its estimate of economic growth for Mexico in 2022 from 4 to 2.8%, due to high inflation, a cycle of interest rate hikes and the still present effects of the Omicron variant of Covid-19.

Private sector specialists calculate that the Mexican economy will grow 2.27% this year, according to the results of the first survey of the Bank of Mexico (Banxico) of 2022.

Jorge Gordillo, director of Economic and Stock Market Analysis at CIBanco, said that given a lower economic growth projected for the country, the prospects regarding the increase in profits of companies listed on the Stock Exchange are also limited.

“Low growth rates for the Mexican economy are not good for the growth of the Stock Exchange,” stressed the expert of the Mexican stock broker.

“Any growth below 3% is bad for Mexico because we fell 8% in 2020 (and in 2021 it grew 5%). The country needs to grow above 4% to return to the rate it had before the pandemic, but low growth should already be discounted in the estimate for the Stock Market for this year,” he added.

The specialist commented that most of the analysts consulted by Citibanamex expect an average growth of 2.5%, in line with the IMF adjustment.

He estimated that the country’s stock market will close the year with growth of between 8% and 10%, compared to almost 21% in 2021.

“The high inflation that shows signs of diminishing, we also have geopolitical problems, with a lot of speculation and pressure that the Federal Reserve drastically change its monetary policy. The pandemic is not giving in, there are things that are not clear in the environment and that makes for a pessimistic perception”, commented the manager at CIBanco.

Jacobo Rodríguez, director of Financial Analysis at Black Wallstreet Capital México, said that the performance that Mexico may have this year will have an impact on the performance of issuers in the stock market, mainly for those whose main market is domestic, contrary to those that They sell their products abroad.

“Mexico is distinguished by having one of the slowest economic recoveries as a result of the impact of Covid-19; other countries have already exceeded pre-pandemic levels and others will do so this year. Everything points to the fact that it could be until the end of 2023 when Mexico would recover those levels,” he explained.

“In general terms, lower growth in the economy does influence the weaker expectations for the stock market,” he added.

Jacobo Rodríguez stressed that 2021 was a “pretty good” year of recovery for stock markets in the world, but this 2022 will be a year of “normalization”.

For this reason, he anticipated that the growth rates of companies will reflect a trend towards pre-crisis levels.

Sectors with opportunity

Analysts explained that even though contractions in company profits are anticipated for this year, there are opportunities in certain sectors.

For Jorge Gordillo, the companies with entry opportunities are those in the leisure and services sector, as well as real estate and a part of consumption because they are still limited by the effects of the health crisis.

He projected that the profits of the companies would grow around 10%, although they will be subject to foreign growth and the impression foreign investors have.

“I think there are still arguments for some sectors to continue to recover. The country is going through difficult times in terms of investment, in terms of growth, but sectorally and regionally it still has many opportunities to grow because they were limited by the pandemic last year,” said Jorge Gordillo.

For Jacobo Rodríguez, the expectations are of episodes of “volatility” for the Stock Exchange due to the uncertainty of a low economic performance. With all this, the opportunities will be found in sectors such as airports and materials.

Their estimates for the BMV are for a year end of 57,800 units.

Jorge Gordillo stressed that at times when there is a cycle of rising interest rates, the tendency is to have a portfolio in companies that still have “a piece of recovery” left, but mostly in those with more solid fundamentals, which guarantee high sales. , that their profits are going to be important, not as much as last year’s.

AMIB survey

Investor appetite for local equities increases

Investors have increased their interest in acquiring shares of Mexican companies, according to the results of the monthly survey “Market Sentiment”, prepared by the Mexican Association of Stock Market Institutions (AMIB).

At the beginning of the year, 66.7% of stock market analysts surveyed considered that at this time “yes” they would be willing to increase their exposure to the local stock market, while 11.1% answered “no” and 22.2% remained “neutral”.

When comparing the survey with that of January 2021, a slight improvement is observed in relation to the interest in investing in the Stock Market. A year ago, 62.5% of those surveyed “were willing to invest”, while 6.3% “no”.

The survey, commissioned by the brokerage houses that operate in Mexico, is carried out every month to 18 analysts who cover the Mexican stock market.

In January, the S&P/BMV IPC, the main index of the Mexican Stock Exchange (BMV), lost 3.14%, after having marked two all-time highs at the beginning of the month, which placed it at 26.73 points from 54,000 integers. Until this Tuesday, the index has fallen to 51,782.67 units, moving away by 4.06% from its second maximum of 2022.

The survey estimates a base scenario for the S&P/BMV IPC to close at 57,650 points in 2022, a level that would mean an increase of 11.33% if the settlement on Tuesday, February 1 is considered.

For its part, for the index of the Institutional Stock Exchange (Biva) the objective for the end of the year is to reach 1,185 integers, an increase of 10.75 percent.

“We believe that the BMV index will continue to rise, but with less dynamism than that registered in 2021, when it registered a 20% return,” said the Association that represents the country’s stock brokers.

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