US Troubles Push Mexico Stocks to 24-Week Low Michael O'Boyle - Reuters go to original
Reuters: J.E. Robert's Michael Pralle says he sees real estate investment opportunities in Brazil and Mexico due to strong economic conditions.
Mexico City - Mexican stocks fell to a 24-week low on Friday as trouble at two U.S. home financing providers and record oil prices clouded the outlook for the economy in the United States, Mexico's top trading partner. The benchmark IPC stock index .MXX closed 0.94 percent down at 27,614.54, the lowest since Jan. 25, while the peso MEX01 firmed 0.07 percent to 10.302 per dollar. U.S. stocks .DJI plunged on Friday on concerns about the stability of major home financing providers Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) and Fannie Mae (FNM.N), which face billions of dollars in losses and may need to raise massive amounts of capital as the housing market faces its worst downturn since the Depression. Mexican traders said a possible collapse of the two firms would deepen the downturn in the U.S. housing market and the crisis in the financial sector, which could end up hurting Mexican growth. Shares of Cemex (CMXCPO.MX), the biggest U.S. cement supplier, shed 3.05 percent to 22.83 pesos while its New York-traded shares (CX.N) fell 3.52 percent to $22.23. Analysts said the troubles at Fannie Mae and Freddie Mac could hit Cemex's sales in the United States, its biggest market. "This goes right to Cemex's weak point, which is the part of home construction in the United States that has been dragging down its growth," said Jaime Aguilera, an analyst at HSBC in Mexico City. At one stage, Mexican stocks were down more than 2 percent, but pared losses after U.S. officials began to talk of safety-net moves that could aid Freddie Mac and Fannie Mae, which have both lost close to 90 percent of their share value since August. OIL'S IMPACT Adding to the gloom, oil touched a record above $147 a barrel, stoking fears that high fuel costs could crimp spending by American consumers and further weaken the U.S. economy, which absorbs around 80 percent of Mexico's exports. Shares of top retailer Wal-Mart de Mexico (WALMEXV.MX) lost 1.43 percent to 39.22 pesos. Conglomerate Grupo Carso (GCARSOA1.MX), which groups Mexican tycoon Carlos Slim's retail and industrial holdings, dropped 3.48 percent to 43.00 pesos. In debt trading, the government's benchmark 10-year peso bond fell 0.412 of a point in price to bid 90.848, pushing its yield up 7 basis points to 9.21 percent. Traders said bonds rose as investors anticipated next Friday's monthly statement from Mexico's central bank, where policy makers are widely expected to raise the benchmark overnight rate by a quarter percentage point to 8 percent. A report this week showed Mexican inflation in June accelerated to its fastest 12-month rate since late 2004. Traders said the peso firmed on expectations of a rate hike next week, which would further widen the spread between benchmark U.S. and Mexican interest rates, making peso-denominated assets more attractive to investors. (Editing by James Dalgleish)
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Business News | July 2008 
Michael O'Boyle - Reuters
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