Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
9.WE HAVE NO CHOICE BUT TO INVEST IN STOCKS AND HOUSING MARKET - Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
Where’s my self-driving car? - 16th Aug 22
Real Reason why Pakistan and India Gained Independence in 1947 at 75th Anniversary - 16th Aug 22
Electronic Payments Can Benefit Your Business - Here’s How - 16th Aug 22
Qualcom Stock Market Harbinger - 12th Aug 22
Apple Exec Gets World's 1st iPhone 14 for Daughters 14th Birthday Surprise Present Unboxing! - 12th Aug 22
Steps to remember while playing live roulette online - 12th Aug 22
China Bank Run Protests - Another Potential Tiananmen Square Massacre? - 11th Aug 22
Silver Coin Premiums – Another Collapse? - 11th Aug 22
Gold-to-Silver Ratio Heading Lower – Setup Like 1989-03 - 11th Aug 22
Severe Stocks Bear Market: Will You Be Among the Prepared 1.5%? - 11th Aug 22
There's a Hole in My Bucket Dear Liza, UK Summer Heatwave Plants Watering Problem Song - 11th Aug 22
Why PEAK INFLATION is a RED HERRING! Prepare for a Decade Long Cost of Living Crisis - 9th Aug 22
FREETRADE Want to LEND My Shares to Short Sellers! - 8th Aug 22
Stock Market Unclosed Gap - 8th Aug 22
The End Game for Silver Shenanigans... - 8th Aug 22er
WARNING Corsair MP600 NVME2 M2 SSD Are Prone to Failure Can Prevent Systems From Booting - 8th Aug 22
Elliott Waves: Your "Rhyme & Reason" to Mainstream Stock Market Opinions - 6th Aug 22
COST OF LIVING CRISIS NIGHTMARE - Expect High INFLATION for whole of this DECADE! - 6th Aug 22
WHY PEAK INFLATION RED HERRING - 5th Aug 22
Recession Is Good for Gold, but a Crisis Would Be Even Better - 5th Aug 22
Stock Market Rallying On Slowly Thinning Air - 5th Aug 22
SILVER’S BAD BREAK - 5th Aug 22
Stock Market Trend Pattren 2022 Forecast Current State - 4th Aug 22
Should We Be Prepared For An Aggressive U.S. Fed In The Future? - 4th Aug 22
Will the S&P 500 Stock Market Index Go the Way of Meme Stocks? - 4th Aug 22
Stock Market Another Upswing Attempt - 4th Aug 22
What is our Real Economic and Financial Prognosis? - 4th Aug 22
The REAL Stocks Bear Market of 2022 - 3rd Aug 22
The ‘Wishful Thinking’ Fed Is Anything But ‘Neutral’ - 3rd Aug 22
Don’t Be Misled by Gold’s Recent Upswing - 3rd Aug 22
Aluminum, Copper, Zinc: The 3 Horsemen of the Upcoming "Econocalypse" - 31st July 22
Gold Stocks’ Rally Autumn 2022 - 31st July 22
US Fed Is Battling Excess Global Capital – Which Is Creating Inflation - 31st July 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Mexico, the “Forgotten” Emerging Market

Economics / Mexico Sep 18, 2012 - 04:41 AM GMT

By: Benjamin_Shepherd

Economics Best Financial Markets Analysis ArticleMexico is the closest emerging market to the US, after all, it’s right next door but it hasn’t been getting much attention from American investors.

A major reason is Mexico’s close linkage to the economic behemoth to its north. Mexico doesn’t just catch cold when America sneezes; it comes down with a nasty case of pneumonia.


Americans consume about 70 percent of Mexican exports, so any US recession brings Mexican growth to a grinding halt. Investors concerned about another major slowdown in the US are usually hesitant to look for opportunities south of the border.

The brutally violent narcotics wars in Mexico also haven’t helped, dominating the headlines and scaring off not just investors but also tourists.

All of these concerns are legitimate, but they’re also overblown. While the US economy struggles with several headwinds, I continue to believe it will muddle through with modest growth, reducing the risk of a Mexican contraction.

Moreover, most of Mexico’s gang violence is confined to the country’s northern border states of Baja California, Chihuahua, Nuevo Leon and Tamaulipas, where the cartels are battling for control of lucrative trafficking routes into the US. Further south, the country is generally peaceful, with most Mexicans simply going about their daily lives.

A number of positive factors are at work down south. Mexico has been a major beneficiary of rising global wages. While Chinese labor costs have been rising by between 12 percent and 14 percent a year over the past five years, Mexican wage growth has quietly averaged between 3 percent and 4 percent (see “The Pay Advantage Goes South”).

Although wage growth in Mexico is not as impressive as in other parts of the world, it’s maintaining a healthy enough level to create a growing consumer class. Higher fuel prices and unfavorable exchange rates have pushed up shipping costs, prompting many manufacturers to shift production back to the Western hemisphere. As a result, unemployment in Mexico is currently at its lowest point in more than 3 years.

These trends have been driving healthy growth in domestic consumption, helping offset export weakness in the past several quarters. In the second quarter of 2012, Mexican gross domestic product (GDP) grew by 4.1 percent, with the country’s services sector contributing 4.4 percent, reflecting robust domestic demand.

The fundamentals of the Mexican economy are also extremely attractive. Credit as a percentage of GDP is only about 20 percent compared to about 50 percent in Brazil, Latin America’s largest economy. That makes Mexico less exposed to another global credit crisis that could result from a turn for the worse in Europe, as well as leaving plenty of room for future growth.

And despite a spike in July to 4.5 percent, inflation in the country has been holding steady between 2 percent and 4 percent, well within the Banco de Mexico’s target band, which reduces the near-term risk of an interest rate hike.

Finally, several economic reforms ranging from liberalizing labor markets to incentivizing private investment in energy markets are in the legislative pipeline and expected to become reality over the next year.

Here’s a look at my favorite play in Mexico, the “forgotten” emerging market

Grupo Televisa (NYSE: TV) is an excellent play on the virtuous cycle of rising consumer incomes.

A Spanish-language television powerhouse, the company is the largest broadcaster in Mexico and wholly owns or has substantial interests in both cable and satellite television providers. It also owns a vast library of Spanish-language programming content.

To place any television advertisements in Mexico, it’s hard to avoid Grupo Televisa. An estimated 70 percent of television viewers tune in to its networks during primetime hours, allowing the company to command a premium and growing ad rate as more advertisers seek to tap rising Mexican incomes.

The company is doing an excellent job of monetizing its content library, recently inking a deal that provides programming access to Netflix (NSDQ: NFLX), which is pushing its services into Latin America.

Grupo Televisa is garnering growing content revenue, as it exports more programming to Univision, a dominant Spanish-language television station in the US.

The company’s pay-television services are also enjoying substantial growth in Mexico, where cable and satellite television services have only penetrated 45 percent of the market.

Sky, Grupo Televisa’s satellite television service, has seen explosive subscriber growth since it began offering low-priced subscriptions that allow access to a greater depth of content than its competitors. The service is popular with Mexican families with expanding disposable incomes and should prove a major growth driver for the company for years to come.

While Grupo Televisa’s aggressive acquisitions have dampened earnings in recent years, annual revenue growth has averaged more than 10 percent over the past five years and earnings should soon catch up.

The stock is currently trading at just 19.9 times earnings, a discount to its historical ratio of 22 times. Learn how to uncover undervalued stocks like Grupo Televisa with this free report.

© 2011 Copyright Benjamin Shepherd - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in