The economic impact of COVID-19 and the confinement measures to prevent more infections seem like stories from the past for 51 companies of the 55 most stock and important in the Mexican market. Even the main index of the Mexican Stock Exchange (BMV), the S & P / BMV IPC, accumulates a yield of 40.87% in the last 12 months and is trading above the psychological barrier of 50,000 units: on Monday it closed at 50,885.95 points, his best level since January 2018.
In the post-pandemic scenario, the recovery is uneven among Mexican stations. On the one hand, the shares of Volaris and those of Cemex accumulated increases of over 200% in the last 12 months, while those of Crédito Real fell almost 45% in the same period.
“The market has an appetite for value shares and the Mexican Stock Exchange is loaded with this type of assets. In addition, it is normal to see how companies in the Stock Market that have to do with all types of consumption, from airlines to retail, recover with the opening and increase of economic activity “, says Luis Gonzali, Director of Investments at Franklin Templeton Mexico
The value shares are those of consolidated companies, with proven income and profits and that are listed at a price ‘punished’ or below what they should considering their fundamentals (perspective, management and financial results of the company).
The exception to the rule
On the side of laggard broadcasters, “most had problems before the pandemic. Each one has peculiarities, but the recovery is being highly segmented, ”says Édgar Arenas, Strategy and Investment Manager at CI Banco.
The company that has suffered the most, in the last 12 months, is Crédito Real. In addition to accumulating a fall of 45.74%, it threads three months of setbacks where May stands out, with a monthly historical low of 29.07% and that leads it to trade at a record low of 6.49 pesos.
“Crédito Real has had a significant deterioration in its loan portfolio, having to restructure its reserves; it also had a (debt) rating downgrade recently. The price adjustment responds to a perception of risk about the issuer, ”says Jonathan Zuloaga, Macroeconomic and Markets Advisor at Columbus in Mexico.
On May 13, S&P Global Ratings lowered the credit rating of Crédito Real’s papers to ‘BB-‘ from ‘BB’, on a global scale, going further into speculative or junk grade. The cut responded to the deterioration of the commercial loan portfolio in an environment marked by the persistent effects of a pandemic that has limited the final results, according to the rating agency.
The pressure on the results of Crédito Real is not new. In the first quarter of the year, although the company’s financial income increased 5.1%, compared to the same period of the previous year, the falls were double-digit in items such as: financial margin, operating income and net income, where in this The last drop was 70.7%.
To future
The following weeks, two events will be in the focus of the market: the elections of June 6 and the expectations that are had regarding the next quarterly reports from the broadcasters.
“Although due to issues of liquidity and appetite for risk, Mexican stocks and globally have the ‘table set’ to continue rising, much will depend on what happens on June 6 and how much political risk the markets perceive,” he says Gonzali.
The other issue is the expectations that weigh on the issuers and their financial results.
“In the event that issuers do not meet expectations, the market may enter volatility or anxiety until it becomes clearer again in terms of results. In Mexico, the last two quarters have been very positive, with double-digit growth in operating cash flow; particularly, in the first quarter of 2021, the increase was above 20% ”, says Valentín Martínez, deputy director of Investment Portfolio Strategies at Sura México.
