Canadian news outlet The Globe and Mail reported in mid-October that Mexico’s stock market is benefiting from reforms and consumer confidence, offering an optimistic outlook for the emerging superpower’s future.
“Mexico is the second-best performing major market in the world so far this year,” reports the media outlet.“The benchmark IPC has soared 23.6 percent in U.S. dollar terms, as investors have become increasingly convinced that cartel violence can’t derail Mexico’s growth.”
One of the major drivers of Mexico’s surging economy and strong market performance is the fact that the country’s manufacturers are beating the low-wage Asian markets, which have traditionally offered the best bargain for companies looking to cut costs. In addition, a series of planned reforms are expected to benefit Mexico real estate and to free up the country’s labor market even more in the coming months, which will lead to even larger gains for investors.
“We’re seeing capital markets expanding,” said Scott Piper, portfolio manager of Excel Funds Management, Inc.’s Latin America Fund. “We’re seeing Mexico’s capital markets expanding, the number of listed companies increasing. We think that the proposed reforms are structural long-term positives for the market.”
According to The Globe and Mail, economists are predicting that Mexico’s economy will soon surpass Brazil to become the fastest-growing economy in Latin America. Fueling this growth are a series of reforms to the country’s financial and labor markets, including measures that would allow for hourly rates instead of daily rates, and that would loosen existing rules on hiring and firing. In addition, there are proposals in the works to change the way taxes are collected for increased revenue and to allow privatization in Mexico’s energy sector.
“We believe that, over time, capital will likely flow much more efficiently to Mexico than Brazil,” shared Benito Berber, who is the senior Latin American strategist of Nomura, which recently issued a report on emerging markets.