Mexican Market Tops 10,000

Mexico’s main stock index surpassed 10,000 for the first time, extending a 17% gain in dollar terms this year, as faster U.S. growth improves the outlook for expansion of Latin America’s largest economy.

The IPC index rose 0.2% to 10,004.69 in Mexico City trading on Monday, led by auto parts producer Desc, glass maker Vitro and steelmaker Hylsamex. The IPC is the fifth-best performer this year among 59 indexes tracked by Bloomberg.

Mexican industrial production rose 2.4% in December, the first gain in nine months, the government said last week.

Demand for Mexican-made goods is increasing after U.S. gross domestic product expanded at an annual rate of 6.1% in the second half of last year, the strongest since the first six months of 1984. Mexico counts on the U.S. to buy about 85% of its exports.

“There is optimism the Mexican economy will follow the path of the U.S. economy,” said Gerardo Lozoya, who helps manage $450 million, mostly Mexican stocks and bonds, at Monterrey-based Investra Consultores.

Economic growth in Mexico may pick up this year to 3.7% from a rate of about 1.2% last year, said Alfredo Thorne, an economist at J.P. Morgan Chase & Co. The Mexican government forecasts 3% economic growth this year, after an estimated 1.2% expansion in 2003.

The Mexican stock index lagged behind other markets in Latin America in 2003, when Brazil’s stock index more than doubled in dollar terms to become the world’s best performer tracked by Bloomberg. Brazil’s benchmark stock index has fallen 0.7% in dollar terms this year.

“Mexico lagged other emerging markets because it is so tied to the U.S. and the U.S. was not doing that well,” said Patricia Perez-Coutts, who helps manage $100 million with AGF Management Ltd., 17% in Mexican securities. The Mexican stock market didn’t perform as well as other emerging markets on concern that Mexican exporters were losing share to Asian rivals in the U.S., particularly from China, said Perez-Coutts, who hasn’t added to her Mexican holdings.

Mexican companies are benefiting from lower financing costs after the lowest inflation in at least 34 years drove interest rates to a record low of 4.1% last year. Last week, the one-month Treasury yield rose to 5.59% after inflation rose unexpectedly in January.

Among the biggest gainers in Mexico this year are Grupo Mexico, Empresas ICA Sociedad Controladora and Vitro. Grupo Mexico, the world’s third-biggest copper miner, followed a 60% jump in the price of copper in the last 12 months on expectation the recovery of the U.S. economy will spur demand for the metal.

ICA and other construction companies, such as Geo are benefiting from government plans to boost construction.