Buy-Mexico Plan Lifts Markets

Mexico’s pension funds were preparing late last week an agreement to buy only local securities for a 12-month period, a decision seen as a sign of confidence that could stimulate markets and cut financing costs. A formal agreement is expected in coming weeks, and would only apply to new funds invested by Afores. The potential inflow to Mexican equities could be $3.3bn by year-end, Merrill Lynch says in a report, using a conservative estimate where Siefores invest in domestic equities half the maximum allowable limits, or as much as $9.6bn with more aggressive investment. Walmex and Carlos Slim-owned America Movil, Carso Global Telecom, and Inbursa account for 49% of the IPC, Merrill says, and should benefit most from the inflow. The bank also expects stocks with a strong weight in the IPC and a low average daily trading volume to appreciate most as a result of potential new Afore investment. It highlights Penoles, Bimbo, Soriana and Slim’s Carso Global Telecom, Inbursa and Grupo Carso. The bolsa responded Friday with a 3% rise to 19,437. Goldman Sachs expects the measure to be innocuous for MXP, as the flow will be important for the availability of local credit, but small compared to the balance of payments. As of the end of January, Afores had $67bn of assets under management and 9.7% of assets invested in foreign securities. Inflows to the system average $500m equivalent per month.