Fondos.Net - “The Mexican StockExchange”

“The Mexican StockExchange”

In 1982, President de la Madrid came to office and decreed that private brokerage houses be given the capacity to transact financial activities in domestic capital markets. His presidential initiative led to the creation of Mexico’s first significant stock market, the Mexican Stock Exchange (Bolsa Mexicana de Valores--BMV).

Here are some facts about the Mexico Stock Exchange that should interest any new investor, looking to invest outside the United States.
The Mexico Stock Exchange is in a rather precarious position; it is second-largest trading partner of the United States. This country’s financial fortunes are therefore largely dependent on the market forces that shape the American economy.

Evidence of this is found in the fact that despite enjoying several years of dynamic growth, when the October 1987 United States stock market crashed. BMV's leading index fell rather sharply in reaction to that situation.

The stock market took nearly a year to recover. However, BMV recovered sufficiently to enjoy robust growth from 1989 through 1991.

By 1991, its index of traded stocks has risen to a high of 128 percent in peso terms and 118 percent by the U.S.A. dollar terms. BMW soon became known as one of the fastest growing stock exchanges in the world. Financial analysts attributed these upward surges in the market to the fact that there was increasing confidence in Mexican economy, as well as financial community positive expectations for lower interest rates and the anticipated approval of the NAFTA.

The most common investments traded at the Mexican stock market are   treasury bills, bank acceptances, and commercial instruments.

Since 1992, there have been 199 companies were listed as trading on the stock exchange.

The total value of stocks traded increased by US$191 billion between 1987 and 1993.

Today, it is Mexico’s biggest firms that have the most liquidity because they’ve invested in an exchange-traded fund, called the MSCI iShares Mexico Fund (symbol EWW).

The volatility and instability in the country’s political situation, directly affects its’ stock market. For instance for the entire year of 1994, the stock market reacted to the stresses caused by the political situation. These were the following, two high-profile political assassinations, and accusations of corruption in Mexican President Salinas's cabinet with unrest in Chiapas.

Although the current political situation in the country is relatively stable, it is still considered to be unpredictable. Any adverse changes will cause huge financial losses in the stock market.

However, it has several factors in it’s favor – despite the fact that it is relatively poor, being classified a developing country, the nation’s business sector have become open to implementing technological advances.

Lastly, economic growth is coming around. Financial analysts optimistically predict that its’ gross domestic product (GDP) to increase by 3.0% this year, while the GDP of the U.S., is predicated to be at around 3.5 to 4.0%.

Proven Investment Advice

Get Dow Theory Forecasts - the acclaimed investing newsletter on buying, selling and holding common stocks. Build and preserve your wealth. Subscribe now and get three free reports.