Mexican stocks to lag Latam peers next year amid sluggish growth

Bloomberg

Mexican stocks are set to underperform emerging market stars next year amid worries about domestic economic policy, sluggish growth and U.S. trade ties.
Mexico’s benchmark IPC index is projected to rise 7% next year to 47,800, according to the median of seven analysts surveyed by Bloomberg. That growth would be in line with the gauge’s performance so far in 2019 after a deal on Mexico’s trade pact with US and Canada fuelled a December rally.
Morgan Stanley and JPMorgan Chase & Co are among banks that expect Latin America’s second-largest economy will continue to lag growth in Brazil and Colombia, where the main indexes are seen posting double-digit gains in 2020. Mexican stocks ranked eighth in a Bloomberg survey of 57 global investors, strategists and traders on their outlook for next year, behind China, India and Russia.
Investors remain wary of a slump in capital investment under President Andres Manuel Lopez Obrador, who halted auctions of oil drilling blocks to private companies and has focused government resources on reviving state-owned oil company Pemex. Unless he reverses his stance to allow more private investment in energy, analysts think Mexican stocks and the overall economy will remain in the doldrums.
“Energy remains the inflection point to decide on a true sentiment shift,” JPMorgan analyst Nur Cristiani said in a research note. “The key to truly unlocking investor confidence? Reopening the oil rounds.”
Mexico’s economy is expected to mount an anemic rebound with growth around 1.1% next year after teetering on the brink of recession in 2019, according to a Citibanamex poll. Analysts said that estimates show company revenue will rise an average 6.1% and profits will grow 14% in 2020, with communications, sectors showing best outlooks.