Mexican stock market unlikely to bounce back up in 2019

The Mexican Stock Market started the year on the right foot. However, financial analysts agree that it is unlikely for it to recover losses accumulated in 2018 .

The Index of Prices and Quotations bounced back 1.5% during the commencement of operations in 2019, which represented the best start of the year since 2010 , when the stock market showed a 2% increase on the first day of operations.

The country’s main stock exchange index totaled 42,271 points at the close yesterday, its highest level since mid-November last year .

The Group of the Central North Airport (OMA) showed the highest market index value, starting the year with a 5.2% increase, followed by companies such as Gentera, Peñoles, the Pacific Airport Group, and the Southeast Airport Group .

One of the most actively traded companies was the telecommunications giant América Móvil , showing a 3% market value increase.

However, analysts agree that the Mexican Stock Market will not recover the 15.6% loss that it registered in 2018 , which was the most severe in the last decade.

Before taking office this month, President Andrés Manuel López Obrador rattled financial markets when on Oct. 29 he said he would scrap a part-built $13 billion new Mexico City airport on the basis of a straw poll that was widely criticized.

The decision kicked off a dispute with some bondholders of debt issued to finance the airport, and raised fears López Obrador could pursue an agenda characterized by arbitrary decision-making and frequent use of referendums.

Market sentiment was also hammered by a bill drafted by López Obrador’s National Regeneration Movement to limit bank fees and another to regulate the mining sector.

“Those decisions were not well received and the unease has persisted among investors,” said James Salazar, economist at CI Banco .

In a report that was issued last November , analysts from the Monex Financial Group anticipated that the stock market would reach 48,500 points by the end of 2019 which, if confirmed, would not be sufficient to reach the 50,000 units registered at the beginning of 2018 .

The present stock market value is unattractive to investment when compared with yields offered by other emerging economies and there’s a possibility of further interest rates rises, states the report.

On his part, the CEO of Bursamétrica , Ernesto O’Farrill , estimated that Mexico’s equity markets were unlikely to yield good results in 2019 since investors will anticipate an economic slowdown and likely recession in 2020.

Global markets have been depressed this year by U.S. President Donald Trump ’s trade disputes with China , uncertainty surrounding Britain’s planned departure from the European Union and more recently the U.S. federal government shutdown .

The central bank has just presented a minute of the Monetary Policy Meeting , by which they decided to raise the benchmark interest rate from 8% to 8.25% , its highest level ever since Mexican authorities proposed the target rate as the main monetary policy instrument in January 2008 .

The market will likely continue to move “laterally” during the first half of 2019 until it becomes clearer how López Obrador is managing public finances, said Jorge Plácido, an analyst at brokerage Vector Casa de Bolsa .

“Investors are willing to pay and stick around until there is more clarity about the economy,” said Plácido.

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