By Carla Mozee
Stocks in Mexico dropped Tuesday, hit by a sell-off in the last
stages of the trading session.
Mexico's IPC fell 1.7% to 21,216.94, erasing earlier gains that
it had logged as equities tracked a rebound on Wall Street. The
benchmark dropped 2.9% on Monday.
The fall toward the close of Tuesday's session was prompted by
program trading through the local Santander brokerage on the part
of an institutional client, according to a Dow Jones Newswires
report, citing traders.
The drop left shares of industrial Grupo Carso down 7.1%.
Mexican stocks had found firmer footing during the day as
positive comments from U.S. banking executives and U.S. Treasury
Secretary Timothy Geithner helped spur purchases of financial
stocks, lifting U.S. indexes. The S&P 500 Index (SPX) rose 2.2%
and the Dow Jones Industrial Average (DJI) rose 1.6%.
The gains on Wall Street came despite a spate of dreary
quarterly reports, including one from heavy-equipment provider
Caterpillar Inc. (CAT), which expects a global economic contraction
of 1.3% this year.
In Mexico City, shares of Fomento Economico Mexicano (FMX), or
Femsa, were able to finish in positive territory after the market
sell-off. The shares rose 1.7% after UBS Pactual initiated coverage
of the brewer and soft-drinks maker with a buy rating.
"We believe Femsa's current valuation is attractive --
considering strong cash generation at Coca-Cola Femsa, improving
beer operations," and room for continued earnings growth at its
convenience-store chain OXXO, said analysts Tomás Lajous and
Albelardo Hernández in a note to clients Tuesday.
UBS also said it prefers Femsa to Grupo Modelo, as it believes
Femsa's retail arm "is under-valued, and much too big to ignore."
The broker has a buy rating on brewer Grupo Modelo's shares.
Modelo shares finished down 6% ahead of the release of its
first-quarter results. The shares were also under pressure after
Modelo said Monday that it won't issue a dividend payment for
2009.
"Whether the decision was driven by the lawsuit with [business
partner Anheuser-Busch InBev] or by the need to save cash in a
difficult year, either one sends a negative signal that could weigh
on the stock in the near term," said analysts at Deutsche Bank.
Banking stocks were mixed after the Senate cleared a bill that
would increase the central bank's authority to regulate fees and
interest rates charged by banks to consumers.
Grupo Financiero Banorte shares fell 3.9% and Banco Compartamos
fell 2%, while Inbursa rose 1.1%.
The peso rose 1.8% against the U.S. dollar in the wake of the
central bank's sale of $3.2 billion in dollar credits by way of a
$30 billion swap line the bank has with the U.S. Federal Reserve.
The peso fell more than 2% a day ago.
Chile's IPSA rose 1.1% and Argentina's Merval gained 2.1%.
Markets in Brazil were closed Tuesday for a holiday.
Elsewhere in Latin America, Colombia has asked the International
Monetary Fund for a $10.4 billion credit line. Mexico was recently
approved for access to a $47 billion credit line, and the agency
will talk with Poland about its request for $20.5 billion.