Ruy Halffter: "Mexico's prospects are bright, underpinned by a buoyant economy" August 27, 2013
Ruy Halffter: "Mexico's prospects are bright, underpinned by a buoyant economy"
Ruy Halffter, head of Equity Capital Markets in Mexico, analyzes the situation of the Mexican equity capital markets and the BBVA Bancomer's role in them.
Q: We are seeing plenty of companies come to market in Mexico. What is the situation at present? What's behind the current boom?
Issues for a total of US$10.38bn have been made so far this year. There have been nine new capital issues, four IPOs (City Express, IEnova, Sanborns and Cultiba), five rights issues (Banorte, OMA, Inbursa, Vesta and OHL), seven structured issues, five issues of FIBRAS –Mexican REITs- (Fibra UNO, FibraHotel, Fibra Inn, Terrafina and Fibra Shop), and two CKDs –structured equity securities- (Nexxus Capital and GBM).
Deals worth US$10.7bn were carried out in Mexico's capital markets in 2012. We should surpass that in 2013 considering that the volume in the first half this year amounts to 97% of last year's total and that there are still a number of issues on tap for the second half.
The so-called "Mexico moment" could partly explain the growth of country's capital market. Investors began looking at Mexico more closely in the wake of the global financial upheaval following the crises in Europe and the US due to the high returns offered by emerging markets. Mexico shows particularly strong growth potential after the change in government in 2012 and the improvements made as a result of the ongoing structural reforms. Mexico is now a compelling investment opportunity. Meanwhile, companies feel the time is ripe to leverage attractive valuations in the market to raise funds.
However, in recent months we have seen a tightening of market conditions. In particular, the increase in rates is affecting MBonos, whose performance has increased about 150 bp. The fact that Afore investment policies involve devoting about 80% of their AUMs to these kind of instruments, is leading to higher requirements from these investors in regard to yields and product quality.
Q: What's BBVA Bancomer's role in all of this?
BBVA Bancomer acts as underwriter in offerings of equities and structured instruments. Of the 15 issues made this year, we were involved in eight, six of equities and two of structured products. We play a big role in the market and are the leading investment bank in Mexico by number of transactions carried out between 2009 and 2013.
We offer the expertise and know-how of a team that boasts vast experience in the market, and the strength and reputation of a bank that is number one in Mexico.
Q: Is now a good time for foreign investors to be looking at Mexico?
Several countries are bullish right now, including the US and certain European countries. The outlook for developed economies has improved recently and it seems that emerging economies are cooling off, especially Brazil, Russia and China. Nevertheless, Mexico's prospects are bright, underpinned by a buoyant economy, the structural reforms underway, greater and better funding for companies and robust development and growth.
Q: What can we expect to see in the coming months? Are we likely to see more primary issues?
Several deals are in the works right now. We expect at least two more FIBRAs this year and several equity issues.
FIBRAs are booming at present thanks to the rewards and opportunities they provide to companies and investors, as well as to the infrastructure sector and real estate sector in Mexico. Therefore, we expect to see more FIBRAS being created in the coming years. What's more, given their structure, once they are listed they can tap the market regularly to fund their projects and growth.
Meanwhile, large banks are starting to come to the capital markets. Santander held an IPO in 2012, while this year Banorte and Inbursa have carried out FOs. We expect other banks to issue in the coming years.
At the same time, certain sectors show scant representation in Mexico's stock exchange, which could pave the way for new companies to come to market there.
The Mexican market is faring extremely well at present and we think this trend will continue over the next few years.