Citi Raises Mexico Equity

Citi has upgraded Mexico equity to overweight within LatAm, elevating it to the bank’s top pick in the region. The promotion is based on severe underperformance since end-2006, as well as the fact that the Bolsa has fallen close to Citi’s “US recession” target of 25,000. Also supportive is the fact that GDP growth is now forecast at 2.9% in 2008 and rates are set to fall 75bp to 6.75%. “At 11.4x forward earnings, Mexico is 10% below its recent average and at its cheapest relative to Brazil since late-2002,” says Citi. “Mexico has many stocks that we feel are now too attractive and too inexpensive to ignore. To play our upgrade, we highlight America Movil, Walmex, Femsa, Bimbo, Homex, Asur, ICA and Mexichem. Citi is keeping Brazil at overweight, saying that it is more risky but attractive for the long-term. “However, it is now further away from our “US recession” target of 50,000, while there is a growing risk that rates may rise later this year,” says the shop.