Mexico takes Latin America to IPO top spot in lacklustre emerging markets

"We have not had a year with lots of IPOs, but in the last three to five years we have seen continuous activity" said Pedro Zorilla, chief operating officer of the Mexican Stock Exchange.

(Photo: Archive/El Universal)
English 16/10/2015 18:31 Reuters Actualizada 18:32

An increase in initial public offerings in Mexico has propelled Latin America to the top of the emerging markets IPO league table so far this year, although volumes elsewhere in the developing world are down by a third.

Tumbling commodity prices and slowing economic growth have hammered emerging markets over the first three quarters of the year, frightening away investors. But 2015 has been poor for stock market debuts overall - Thomson Reuters data showed on Friday that global IPO volumes were down 31 percent from 2014.

Across emerging markets, amounts raised via IPOs since the start of the year to mid-October have fallen by 31 percent to just over US$43 billion. This compares with US$63 billion over the same period in 2014, Thomson Reuters said.

But Latin American IPO volumes have jumped 133 percent to US$1.9 billion compared with US$800 million over the same period last year. That was down to Mexico, where listings have raised US$1.7 billion from US$659 million, the data showed.

By contrast, IPOs declined across the rest of the developing world. Asian volumes fell 30 percent, Africa's 50 percent and emerging European listings dropped 60 percent versus the same period last year.

"The past few years have not been bad," said Pedro Zorilla, chief operating officer of the Mexican Stock Exchange, told Reuters on the sidelines of an investment conference in London.

"We have not had a year with lots of IPOs, but in the last three to five years we have seen continuous activity," Zorilla said. He hopes to see 10 or more stock market debuts next year and 10 to 15 a year after that.

Mexican construction conglomerate Elementia came to the market in July and conglomerate Alfa listed its auto parts company Nemal the same month.

One reason may be better investor appetite for Mexico, which benefits from an improving U.S. economy and has also introduced sweeping economic reforms. Stock markets in other Latin America countries, which are less diversified and more commodities-focused, have struggled.

The data showed Latin America had just one IPO this year, with US$193 million raised by a Brazilian firm.

"Market conditions have been terrible," said Juan Pablo Cordoba, CEO of the Colombia Stock Exchange. "The last 12 months for Latin America in general, and Colombia in particular with the decline in oil prices, have been very tough," he said, adding a couple of IPOs had to be pulled.

Valuations have also not been attractive for companies, with the main stock index down 20 percent since the start of the year and some companies down as much as 40 percent, Cordoba said.

"The market is not recognising the true value of these companies, so maybe it is not the right time to issue."

The recent turmoil in emerging market heavyweight Brazil has added to the pain for many of the commodity-driven economies across Latin America, said Francis Stenning, chief executive officer of the Lima Stock Exchange.

"Brazil for many investors is Latin America," he said, speaking on the sidelines of an event to promote the Latin American Integrated Market, or MILA, which connects stock exchanges in Mexico, Chile, Colombia and Peru.

Index provider MSCI has added to the headache for Peru, reviewing the country's eligibility for its "emerging market" benchmark index until next June due to low liquidity.

Stenning said the bourse had intensified efforts to ramp up liquidity and predicted a couple of listings before June, though he declined to give any further details.

Battered currencies and low valuations had created good opportunities for investors, but there was still a lot of hesitation, said Jan Dehn, head of research at fund management firm Ashmore.

"There is plenty of value now," said Jan Dehn. "One thing is whether there is value and opportunity, another thing is whether people are actually buying ... and we are not quite at boiling point yet."