Mexican Companies Are Lining Up to Sell Shares, Barclays Says

(Bloomberg) -- Mexican companies are pushing ahead with plans to sell shares, seeking to tap renewed interest from global equity investors, according to the head of Barclays Plc in the country.

Most Read from Bloomberg

• Plunging Home Prices, Fleeing Companies: Austin’s Glow Is Fading

• Wall Street Humbled as Fast-Reversing Markets Confound the Pros

• Apple Intensifies Talks With OpenAI for iPhone Generative AI Features

• The Long, Slow Death of Urban Nightlife

• Javier Milei Fuels Wild Rally That Makes Peso No. 1 in World

Raul Martinez-Ostos, chief executive and chairman of Barclays Mexico, said between five and 10 equity capital markets deals are in the works, spurred on by the success of several recent listings. The companies, which he didn’t identify, would list domestically or in the US as foreign investors move to buy Mexican stocks, he said.

“People are putting their money to work in Mexico,” Martinez-Ostos said in an interview at the country’s annual banking convention in Acapulco. “They see a huge opportunity here that they have not seen in a long time.”

The uptick shows how investors are looking past the upcoming election and betting Mexico’s economy will continue to be strong under the next government. Claudia Sheinbaum, who holds a dominant lead in polls ahead of the June 2 vote, is seen as more business friendly than outgoing President Andres Manuel Lopez Obrador, who is prohibited from running for reelection.

Mexico’s peso has been one of the top performing major currencies this year, even with a resurgent dollar, amid support from high local interest rates, close ties to the US economy and expectations that more manufacturers are moving to the country in a trend called nearshoring. The economy is seen growing 2.4% this year, according to a survey this week from Citibanamex, supported by domestic demand, down from a 3.2% rate in 2023.

Martinez-Ostos said he’s getting “zero questions” about the election during meetings with clients. Instead they are focused on the success of recent equity listings in the US by Vesta and Tiendas 3B, along with other follow-ons in Mexico.

Capital International Investors and Singapore’s sovereign wealth fund bought significant positions in those stocks, which are up 15% and 7% since their US listings, according to data compiled by Bloomberg. Foreign investors, meanwhile, poured nearly $1.1 billion into stocks in Mexico during February and March, breaking six-months straight of outflows, according to the most recent data available from the central bank.

Martinez-Ostos has led Barclays through some of the the country’s biggest deals during the Lopez Obrador administration, including the government’s $6 billion deal to buy power plants from Spain’s Iberdrola and an acquisition of a refinery in Texas.

Barclays also advised Fomento Economico Mexicano on the sale of its stake in Heineken shares and real estate company Vesta on its follow-on US share sale.

Read More: Investment Bankers Are Starting to See Mexico as a Money Spinner

M&A Potential

Martinez-Ostos expects mergers and acquisition activity to generate the biggest tickets for Mexico this year and next. There were nearly $26 billion in deals in 2023, compared to almost $20 billion the previous year, according to data compiled by Bloomberg.

He expects the nation’s pension funds, or Afores, to play a much bigger role in investing in real assets, like electricity infrastructure or highways. Global funds are also targeting major acquisitions in infrastructure, he said.

Martinez-Ostos hailed the Iberdrola deal, which is structured to be partly funded by private equity vehicles that will be sold to the nation’s pension funds, as a watershed moment for the energy sector. There is “a lot of appetite” for electricity sector and highway projects, he said.

“The pro—business part of the Iberdrola deal set an example in this sector that no one wanted to enter,” he said. “Now it’s unblocked.”

Most Read from Bloomberg Businessweek

• US White-Collar Job Growth Stalls, Even in Pandemic Boomtowns

• Caught Between the US and China, a Powerful AI Upstart Chooses Sides

• How North Korea’s Man in the West Ran Afoul of US Authorities

• Studio Behind Dune Eyes Growth, Even Without a Paramount Merger

• How a Massive Hack of Psychotherapy Records Revealed a Nation’s Secrets

©2024 Bloomberg L.P.