The rise in interest rates, the increase in inflation levels and other risks such as the increase in infections due to the new variants of Covid-19, both in Mexico and in other countries, will be factors that are putting pressure on the stock markets.
This Thursday, the Bank of Mexico (Banxico) increased the reference interest rate by 25 basis points to leave it at 50%, the same level as in June 2020. It was the fourth increase this year.
The Mexican Stock Exchange (BMV), in its main index, the S & P / BMV IPC, ended the session at 51,707.01 points, this is a marginal increase of 0.01%, however, prior to the central bank’s monetary policy announcement, the IPC fell 0.36% and after the news, it rose 0.19%, reaching 51,803.82 points.
For its part, the second largest stock market in Mexico, the Institutional Stock Exchange (Biva), in its main index, the FTSE Biva, had a brief correction of 0.02% during the day, closing at 1,066.01 points.
However, at the time of the announcement, Biva rose 0.18% and after Banxico’s decision, it touched 1,061.82 points with a decrease of 0.41%, to adjust again towards the end of the day.
I had already assimilated it
“Actually the stock market had already assimilated the increase of 25 basis points to the benchmark interest rate of Banxico, so there was no greater viability than what has already been seen during the last week. In addition to the fact that the risk-free rates with which the valuations are discounted had already shown increases in recent days, ”said Carlos Hernández, senior analyst at Masari Casa de Bolsa.
In the case of the IPC, it broke with two days of falls, while Biva added three days of losses. However, so far in 2021 both stock exchanges accumulate gains of 17.34 and 17.53%, respectively.
James Salazar, Deputy Director of Economic Analysis at CIBanco, explained that “if the interest rate increases, fixed income assets, in relative terms, become a little more attractive than variable income instruments.”
“Now with the rate hike, the equity market is going to need catalysts to have a boost, although there is the end-of-year rally, the next would be the next meetings of the Federal Reserve, then the unemployment and inflation data in United States and then monetary policy decisions. Although we will see very lateral movements in the equity market in Mexico, “he said.
Other market challenges
Marcos Daniel Arias Novelo, economic analyst at Monex, explained that “in Banxico there are growing concerns regarding the inflationary environment, there is an upward trend in the balance of risks. The risks for the formation of prices and expectations have increased, so it is referred to that the evaluation of the behavior of the pressures will be narrow from now on ”.
Carlos Hernández explained that “going forward, I would consider that it is a panorama of certain volatility in the first half of next year, depending on the proposals for monetary perspectives in the December meeting. The risks ahead are that risk-free rates will begin to increase rapidly ”.
James Salazar said that the reactions of the local stock markets “were limited impacts, as they are more susceptible to external issues, such as the increase in the numbers of Covid-19 infections in Europe and Asia, which could again affect companies linked to the sector. tourism, mainly ”.
Inflation, said Carlos Hernández, would be impacting through valuation and demand for higher premiums by investors when taking positions in some assets. And in fundamental terms, it could have a temporary impact on the margins of the companies listed on the stock exchange centers.
Alejandro Javier Saldaña Brito, Deputy Director of Economic Analysis at Banco Ve por Más, explained that “various risks persist that could make inflationary pressures take longer to subside.”
Among them, he mentioned the latest spike in infections due to Covid-19 in some countries of the world, which can further obstruct the supply of certain goods.
Other risks are the additional rise in energy prices during the winter and episodes of exchange rate depreciation associated with the monetary normalization in the United States.
Yet another risk is that medium-term price expectations adjust upward.
Within the S & P / BMV IPC, most of the issuer’s shares closed at a loss, with 19 stocks in red, 15 in green and one unchanged.
In the drops, the shares of Grupo Bimbo stood out, which lost 3.12%, as well as those of Grupo Aeroportuario del Pacífico with a 2.41% drop and the industrial developer Vesta with a decrease of 2.28%, mainly.
Reference-www.eleconomista.com.mx