Emerging Markets
Investment Outlook: Mexico's Sizzling Investment Prospects
The investment appeal of Mexico is underrated and the country should continue to benefit from its proximity to the US, according to Henderson Global Investors.
The firm also points to remittances from US-based workers and an improving domestic economy as contributors to Mexico’s beaming investment horizon. Meanwhile, President Enrique Peña Nieto, who was elected last July, has promised a slew of economic and social reforms related to tax, energy and education in a bid to boost competitiveness.
The country’s economy grew by 3.9 per cent in 2012 and has expanded more rapidly than that of the US in recent years, Henderson said. It is the second largest economy in Latin America and has been “one of the shining stars in the region,” the firm added.
Although Mexico is dependent on oil and remittances from migrant workers in the US, there is a burgeoning middle class that is driving up consumer spending. Henderson pointed to a World Bank report, which found that some 17 per cent of Mexicans joined the ranks of the middle classes between 2000 to 2010.
“Consumer confidence was hammered during the financial crisis due to the spillover from the US recession, but since 2010 the consumer confidence index has steadily risen, reaching its highest level in nearly five years in January 2013,” the firm said.
It added: “With a population of 114 million Mexico’s consumption power is set to rise over the decade; this is good news across the border as Mexico is also a significant growth market for US products and services.”
Overall, Mexico has entered 2013 in good shape, backed by an improving manufacturing sector, sustainable jobs creation and slower input price inflation.
On a similar note, HSBC Private Bank recently wrote that a blend of strong growth potential, robust earnings growth and reasonable valuations is expected to drive outperformance of emerging market equities compared to other regions over the coming months. But within emerging markets the bank has singled out Mexico, Turkey and South Korea as the ones to keep a closer eye out for.