Market Analysis : Securities Markets Essay

Market Analysis : Securities Markets Essay

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Securities markets in Mexico are orderly and relatively innovative; however, corporate markets lag behind those in comparator countries. The government bond market accounts for the bulk of the fixed-income segment, and is well developed and active. The creation of an international segment (Sistema Internacional de Cotizaciones- SIC) in the Mexican stock exchange (BMV) has increased trading and provided access for domestic investors to international assets. However, there are relatively few listed equities in the BMV- compared to Chile or Korea- and the number of initial public offerings (IPOs) in recent years has been quite small. The fixed-income market is characterized by few issuers, most of them being government entities and large blue-chip companies. [1]

Unfortunately, while financial savings rates have been growing, little has been transformed into long-term investments. Most of the savings remain in traditional savings accounts. Institutional investors still hold the bulk of their assets in government bonds. The conundrum faced by Mexico, as well as many other emerging markets, is how to increase both the supply and demand for relatively riskier private sector securities, particularly of longer maturities. Currently, investors are uninterested in illiquid investments; while companies see little benefit in listing. [1]

Mexico will need to find solutions to further develop its capital market to fund development needs. In the infrastructure sector alone, the country needs approximately US$230 billion of new investments. In the corporate sector, provision of financing by banks fare well below peers, especially for small and medium enterprises. Meanwhile, the pension fund industry, growing at about US$20-US$30 billion annually...

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Foreign investors have consistently been present in some segments of the Mexican capital market, but largely absent in recent IPOs. Approximately 20 percent of government securities are held by foreign investors. The market also suggests that foreign participation in nongovernment bond issuance is also significant. In the public equity market, foreign investors hold approximately 9.5 percent of the free-float. However, there is an indication that foreign investor participation in equity issuance (both initial offering and secondary offerings) have been declining as issuers’ efforts have been directed to attract domestic institutional investors, particularly AFORES. [1]

[1] (2016). Retrieved 20 November 2016, from

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