The general director of the Mexican Stock Exchange (BMV), José-Oriol Bosch, assured that the sharp drop in technology companies on Wall Street represents “an opportunity” for Mexican investors to invest in companies in the sector through the System. International Quotes (SIC).
Carlos González Tabares, director of Economic Analysis at Monex Casa de Bolsa, agreed saying that there is an opportunity to invest in the SIC in technology firms in the United States that have fallen in the year.
“I agree with the invitation to participate in the global market, especially in the North American market, due to the adjustment it has had.” Gonzalez said. “It is always better to buy cheap than to buy expensive”. However, he warned that more downward adjustments are still in the offing in the short term.
José-Oriol Bosch stated that despite the depreciation suffered by the peso after the publication of the inflation data for the United States to May (8.6% at an annual rate), in 2022 the Mexican currency has had a better performance against the dollar in compared to currencies from other emerging markets, a factor that favors the BMV’s SIC.
Since the inflation data in the United States was released -on June 10-, the peso had depreciated, as of Monday, 61.04 cents or 3.10%, for an exchange rate of 20.2786 units per greenback.
The inflation data increased the market’s expectation that the United States Federal Reserve (Fed) was going to speed up the pace of interest rate hikes, which strengthened the dollar.
“When you buy shares through the SIC, the prices are in dollars and are converted to pesos, so when you invest, you don’t want to expose yourself to the exchange rate, you prefer that it remains relatively stable,” explained Carlos González. “You assume the risk of the issuer and do not want additional exposure to foreign exchange risk.”
There will be no overreaction
The general director of the BMV said that the decision that Banxico will announce this Thursday will not generate an “overreaction” in the Mexican stock market.
“The market, the analysts, practically all of them, are expecting that this week we will see an increase in rates (…) by the Bank of Mexico of 75 base points, taking it to 7.75%, then, as they say in the markets, It is already very discounted, I think there will be no surprises, “he said.
The manager explained that the overreaction observed last week on Wall Street after the Fed’s announcement to increase its rate by 75 bp was due to the fact that there was no consensus among analysts regarding the magnitude by which it was going to increase.
He assured that the expectation is that the cycle of restrictive monetary policy by the Mexican central bank will continue during the following months, with which the rate would end the year at 9 percent.