Focus: Capital Markets

More to IPO

More to IPO

Jul. 14, 2013

The market cap for the BMV as of June 2013 was some $551 billion, representing 43% of national GDP, with local institutional investors representing an estimated $304 billion of the total in 1Q2013. The BMV has 139 listed companies, while there are 210 debt issuers active on the market. The IPC Index, which measures the top 35 stocks on the BMV, has had a rough ride over the past 12 months, peaking at 45,912.51 in late January 2013, before crashing to 37,517.36 points on June 24 on the back of fears of a US economic slowdown and the end of the Quantitative Easing program from the Fed. The market managed to recover following reassuring signals from US authorities, jumping some 8.3% to close 1H2013 at 40,623.3 points. The positive reaction was the strongest surge seen on the BMV since 2009.

Underpinning the renewed interest in the BMV has been the installation of a new electronic trading system in September 2012, which has the ability to support high-frequency traders. The MoNET system is capable of processing over 100,000 messages per second, and is reportedly 300 times faster than the system it replaced, Sentra Capitales. Daily trading volumes have responded to the new technology, with the number of shares traded in 1Q2013 one-fifth higher than over 2012. The MoNET system was extended to the nascent derivatives market in April 2013, though daily trades in derivatives have been muted over 1Q2013. Derivatives, including futures and options, are traded on the BMV's own vehicle, MexDer.

THE CHASE

Six IPOs were launched in the 1Q2013, strong growth considering the 10 that were listed over 2012. The size of IPOs listed over the past year has been impressive, including SANMEXB's $4.3 billion listing were retail heavyweights Grupo Sanborns SAB, which raised $930 million in February 2013, further increasing the strong presence of companies associated with Carlos Slim on the BMV. This was the first IPO listed by a Grupo Carso entity since it listed real-estate company Inmuebles Carso SAB and silver and gold miner Minera Frisco SAB in February 2011. Sanborns is a major retailer throughout Mexico, with 414 stores across the company, including the Mexican operations of Sears as well as its growing chain of Apple stores in the country.

Also joining the IPO club was the BMV's first ever energy company, Infraestructura Energetica Nova SAB (IEnova), which managed to raise some $600 million in March 2013. IEnova is looking to cash in on foreign interest in Mexico's growing need for natural gas, while the mooted energy reforms the Pena Nieto administration is beginning to explore are also enticing investors. However, some Mexican companies are looking to double their market reach by launching an IPO in both Mexico City and New York. In early June 2013, low-cost airline Volaris Aviation filed for an IPO in both markets that it initially indicated would be $100 million in size. While its A class shares would be listed on the BMV, it would be represented in New York through American Depository Shares (ADSs). This is not the first time that a Mexican company has gone down this route, though it does help underline the interdependence of Mexico's economy and that of its northern neighbor. Volaris will not be alone in looking to fly an IPO over 2013, with rival ABC Aerolineas, owners of Interjet, also looking to join the market in 4Q2013. Initial estimates put the size of the deal in the $1 billion region.

The growing wave of IPOs on the BMV is beginning to attract the attention of Wall Street, and with over $11.8 billion in deals going down over 2012 alone, there is no wonder. JP Morgan has tripled its employee count in Mexico since 2010, while adding an additional two stories to its office space to make room for the new arrivals. Goldman Sachs finally achieved a full license in November 2012 and is also now anxious to begin chasing deals in Mexico. As the star of Brazil begins to wane, Mexico is being seen as the next emerging market that could fuel a new boom in emerging market growth. Underlining the exodus, Brazilian banks are also looking to increase their exposure to the Mexican market. Banco Itau BBA SA announced in late 2012 that it would be looking to open a corporate and investment bank in the country, while underwriter Grupo BTG Pactual has already applied for a local brokerage license.

NEW ANGLES

The BMV has launched a number of new products onto the exchange that aim to help bring liquidity to new areas of the economy. The creation of real estate investment trusts (REITs) have been a boon to real estate developers. Better know as FIBRAS in Mexico, some five REITs were listed in 1H2013, raising some $4.5 billion. As well, in order to better involve Mexico's mandatory pension funds, known as Afores, in the capital markets and overcome legal barriers to their exposure to equities, Structured Equity Securities (CKDs) were created in 2009. The market has warmed to these new instruments, with 29 deals worth some $5 billion conducted since the introduction of CKDs. Naturally, the Afores market is one that many wish to target as a potential investor. Total Afores assets under management were at $146.29 billion by end-2012, with just 22.7% of these funds being held in local and international equities. The main exposure that Mexico's Afores system has is to government debt (54%), with local debt instruments coming in second (18%).

Other ways to increase liquidity and encourage more companies to list are also being tackled by the BMV. Regional tie-ups with other exchanges are in the offing, with the BMV acquiring an 8.8% stake in the Bolsa de Valores de Lima (BVL). The biggest leap in the liquidity pool is set to arrive in 2014, as the stock markets of Chile, Peru, and Colombia will join with the BMV to create a united stock trading platform. Known as the Mercado Integrado Latinoamericano (MILA), the new platform will put the four united markets well on the hunt to overtake Brazil's BOVESPA as the top dog in Latin America.