Mexican ADRs are commanding increased investor interest
Mexico’s stock market has been commanding increased investor interest ever since President Donald Trump set foot in the White House. His protectionist pledges against Mexico have weighed down the Mexican peso sharply against the US dollar (UUP). Mexican equities on the local stock exchange, as well as listed ADRs trading on the US stock market (SPY) (IWM), had taken a hit. The Mexican equity-tracking iShares MSCI Mexico Capped ETF (EWW) touched its 5-year low ($42.64 a share) on January 16 this year. The Mexico Fund, Inc. (MXF) and the Mexico Equity & Income Fund Inc. (MXE) are other US-listed funds providing exposure to Mexican equity.
Top 5 Mexican ADRs
|ADR Ticker||Name||Sector – Industry||P/E||P/B||YTD Return%|
|BSMX||Grupo Financiero Santander Mexico SAB de||Financials- Bank||13.81||2.21||47.25|
|CX||Cemex SAB de CV||Materials- Construction||13.83||1.48||20.79|
|MXCHF/||Mexichem SAB de CV||Materials- Chemical||14.69||2.01||20.25|
|BRGGF||Banregio Grupo Financiero SAB de CV||Financials- Bank||14.53||2.74||16.32|
|GBOOF/||Grupo Financiero Banorte SAB de CV||Financials- Bank||17.18||2.54||45.87|
|Note: Returns and ratios relate to data as of August 10, 2017|
Stock market recovering, economic indicators favorable
However, the markets appear to have recovered from their January abyss now; the EWW is up 30% since January 16 (as of August 10). Moreover, economic indicators seem to be putting Mexico in a favorable light; GDP growth gradually gaining, unemployment is low , inflation has been rising fuelled by consumer spending, and the country’s balance of trade position is substantially better now.
However, Mexican equity still has a long way to go before it sees its market recovering to levels seen before the oil price plunge in mid-2014. The price of oil matters to Mexico as oil revenues make up close to 10% of the Latin American (ILF) economy’s export earnings. The EWW had seen trading in $65-$70/share range until the third quarter of 2014.
US investors seeking bargain opportunities
Now, while Mexican equities take their time to gain pace as they tread northward, long-term investors are seeking out bargain opportunities. For US investors, there are a lot of Mexican companies which have their ADRs trading on the US exchanges. We filtered the list for you, to arrive at the top 5 Mexican ADRs currently trading at the most attractive valuations on the US exchanges. These include 2 companies from the materials sector and 3 from the financial sector (see table above).