Mexico City — The perceived role played by nearshoring in Mexico differs among the main players in the financial sector, who believe that the way to improve conditions in the local stock market and reactivate Initial Public Offerings (IPOs) requires several elements.
This economic reconfiguration, with the relocation of supply chains, encouraged several companies to turn to the stock market as another source of financing. However, it is not an attractive enough option to consider debuting in the capital market, according to some analysts.
Bloomberg Línea consulted several players in the stock market on the impact that nearshoring will have on the lack of new companies debuting on the Mexican Stock Exchange.
On the one hand, the CEO of Mexico’s stock exchange (BMV), José-Oriol Bosch, said that more elements than nearshoring are needed to reactivate the capital market, but that the right playing field is in the process of being created.
“Part of the increase in long-term debt has been thanks to nearshoring, part of the activity that has been very good of subsequent, follow-ons for real estate investment trusts (REITs) and others has been thanks to that, but from there to us seeing new companies arriving on the BMV through nearshoring, no,” Oriol Bosch said in an interview with Bloomberg Línea.
Issuances registered a total 218 billion pesos ($12.4 billion) in the long-term debt market of the Mexican stock exchange to September, an increase of 78% compared to the same period of 2022. Subsequent share issues, also known as follow-ons, totaled 9.84 billion pesos ($563.1 million), an increase of 185% over the same period of 2022, according to figures from the BMV.
Companies continue to show their interest in the market. On the one hand, the largest real estate investment trust in Latin America, Fibra Uno, announced that it will carry out a spin-off of its fully industrial assets to create Fibra Nearshoring Expert & Technology (Fibra Next), which, according to a Bloomberg report, would be an OPI valued at $1.5 billion. However, this has not been confirmed by the firm.
This week, Grupo Financiero Mifel’s president and CEO, Daniel Becker, said that next year the firm could reactivate plans to list on the stock market. Six years ago, the bank decided to indefinitely suspend an IPO it had initiated prior to the 2018 presidential elections.
For the president of the Mexican Association of Stock Market Intermediaries (AMIB), Álvaro García Pimentel, nearshoring will bring confidence to the market.
“Vicious circles are broken with opportunities,” he said in an interview with Bloomberg Línea. “It’s a unique opportunity that has never happened before. If you put together the USMCA and nearshoring, it’s a privilege to be an entrepreneur right now.”
For his part, chief economist at Banorte Alejandro Padilla said nearshoring is a differentiating factor for the country, in addition to being a positive medium-term element in the market.
“There are many areas of the economy that can benefit, not only large companies, but the entire supply chain,” he explained.
“We should see a stock market that goes hand in hand with this expectation of greater growth in Mexico, the development of commercial clusters and all the potential that this could imply for the country,” Padilla said.
Other elements that favor a resurgence of IPOs
María Ariza, CEO of the Bolsa Institucional de Valores, said recently that the market needs to be ‘at the altitude’ of the circumstances. For this reason, the approval of the reform to the Securities Market and Investment Funds Law was launched this year, which seeks to encourage the entry of medium-sized companies in less time and with fewer costs.
On October 31, the finance commission of the Chamber of Deputies approved the reform, and which will be submitted to the full house for voting on November 6, and where it is expected to be approved to continue with the secondary provisions.
“More companies can come to the market with the approval of this law,” said José-Oriol Bosch.
The vice-president of stock exchange supervision of the National Banking and Securities Commission (CNBV) projects that it will be until the second half of 2024 when the first simplified issuer will enter the local stock market.