Mexico’s Three-Month Stock Boom Comes to Abrupt Halt
Growing uncertainty about approval of the North American Free Trade Agreement, combined with other factors, has abruptly ended a three-month boom on one of the world’s fastest-growing stock markets.
The Mexican stock exchange index tumbled to 1,628 at noon Monday, a drop of nearly 10% in four days. Despite a slight rally that brought the index to 1,664 by the close of the day, the market is at its lowest level since Nov. 23, and analysts are predicting that the index could fall as low as 1,550.
The last four trading days have marked the end of a boom that caused the index to rise 43% since late September.
Analysts blamed the drop on a variety of factors, from jitters about NAFTA to lower earnings expectations for key companies.
“A market does not fall 10% for just one reason,” said Javier Ramirez, head of international operations at Vector, a Mexico City brokerage. He cited other factors, including:
* Higher interest rates in last Wednesday’s Mexican treasury bill auction.
* Worries about larger economic issues, such as the growing trade deficit, possible overvaluation of the peso and lack of liquidity.
* Concerns about a glut of Mexican stock on international markets, including a $369-million placement last week by Grupo Carso.
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