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MEXICO-IPC : Euphoric

04/05/2012 | 12:12pm
Opinion : Check out the trading range breakout  37500/  40000
The IPC « Indice Precios y Cotizaciones » is the main index of the Mexican Stock Exchange. This one is composed by the 35 largest companies in the country, including the two highest weights represented by the telecommunication company owned by billionaire Carlos Slim (America Movil with 24%) and by the Wal-Mart local branch (14%). Telecommunications sectors and consumption together weight 50% of index.

The IPC closed 2012 first quarter with growth of 6.5%. This performance comes after an euphoric fourth quarter (+11%). The best performances since early year are Empresas (engineering and construction company +43%) and Cemex (producer and distributor of products related to construction with strong international diversification +38%).

At current valuation, price earnings ratio is at its historical highest with an average of 19.79x, slightly above the average in other emerging markets such as Taiwan, South Korea, Brazil or Chile. Inversely, the volatility index is at lowest of 13, indicating a flawless trend.

The Mexican index remains on historical highest near to 40 000 points. Since 2001, the index accumulated a performance nearly 610%. During the last decade, the IPC recorded seven years in positive, with periods of significant upward acceleration, as in 2005 (with 12 consecutive weeks).

Technically, the main index of the 14th largest economy set up a double-bottom pattern, which drove the upward movement and pushed the index on historical highest. The last acceleration indicates a strong consensus buyer, setting up a bullish gap.

In this particular context, if the technical pattern remains largely bullish, on the medium-term, the index becomes vulnerable in the short-term. This weakness should drive to a consolidation phase with a pull back towards area of 38 320 and 37 500.
MEXICO-IPC : MEXICO-IPC : Euphoric
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