The optimism of investors in the face of a possible boom in the phenomenon nearshoring in Mexico is leading them to buy local shares in real estate, transport companies and banksanalysts said, in an attempt to take advantage of the wave of signings Americans that settle in the north of the country.
The trend has seen an increasing number of companies move production closer to North American buyers, specifically Mexico, and away from Asia, following supply chain difficulties seen during the pandemic.
Among the biggest winners in the Mexican stock market are real estate companies such as Vesta, which shot up 22% in the first quarter, along with Fibra Prologis. (with an increase of 17%) and Terrafina Fiber – (which went up to 19%); surpassing the progress of eleven% of the referential stock market index of the country.
This group of real estate Fibras, or real estate investment trusts, owns a large number of industrial parks and factories in the north that are reaching capacity thanks to an influx of clients from the manufacturing sector.
The “Fibras are the obvious beneficiaries of ‘nearshoring’”, said Carlos Alberto González Taberes, an analyst at Monex, since the high demand for industrial parks in northern Mexico raises rents and income.
Fibra UNO, for example, held an occupation of 98% in its portfolio of industrial properties in the fourth quarter.
“I’m very happy to say it and I don’t want to sound presumptuous, but we’re in the best shape to take whatever nearshoring throws at us.”said the executive director of Fibra UNO, Andre El-Mann Arazi, in the videoconference to discuss the company’s quarterly results.
Carlos Peyrelongue, Mexico stock analyst at Bank of America, said the rebound in Fibra shares “It’s definitely due to the nearshoring drive”.
Transportation and Bank
Transportation groups are another set of beneficiaries of the trend to move production points closer, analysts say, with several far outpacing benchmark gains.
The shares of the Grupo Aeroportuario del Centro Norte skyrocketed 3. 4% in the first quarter, while the shares of Grupo Aeroportuario del Pacífico rose by 27%surpassing its European peers such as Aeroports de Paris and Fraport.
At least part of these companies’ growth comes from nearshoring, the CEO of Grupo Aeroportuario del Centro Norte said in his fourth-quarter results conference call, and airport traffic is growing fastest in northern states like Nuevo León and Chihuahua. .
“The impact within ‘nearshoring’ it’s real,” said general manager Ricardo Dueñas. “Traffic performance in recent months, (in) ‘nearshoring’ destinations (such as) Ciudad Juárez, is growing at a much higher percentage than average”held.
Meanwhile, shares of GMexico Transportes, the transportation arm of conglomerate Grupo México, rose a eleven% compared to the same period last year.
Peyrelongue says investors are watching the company closely, as it has the largest rail network in Mexico and is well positioned to benefit from a boom in cross-border trade, helped by the effects of the country’s free trade agreements.
Shares of local banks also get a boost from the trend, although they have recently come under pressure due to concerns about global financial stability.
González says that the main financial institutions are expected to benefit from the economic tailwind in Mexico, after a total increase in exports of the 12% annually at the end of 2022.
One of Mexico’s largest banks, Banorte, also says it is preparing to receive the benefits of the ‘nearshoring’ and announced last week that it plans to hire 800 new employees to meet the demands of the phenomenon, including to finance infrastructure.
market skepticism
Despite Tesla’s recent announcement that it will set up a large factory in northern Mexico, there are still doubts about the prospects for the country with the ‘nearshoring’.
“(I am) skeptical of the idea that the reorganization of supply chains will result in a large surge of capital inflows in the short term”said Deutsche Bank’s chief Latin American economist Sebastian Brown.
“There are areas… in which (Mexico) falters”he said, pointing to limitations, for example, in the power sector, where there are concerns that an influx of new factories could overload the power grid.
Morgan Stanley economists also said in a report last year that they believed Mexico “was not prepared” for a new wave of ‘nearshoring’ and had “underinvested”.
González says that any boom in the trend “It will be little by little.”
But Peyrelongue argues that investors should anticipate what is a clear trend, amid the “strong appetite” of companies to relocate closer to the United States.
“These global companies want to diversify their risk, lowering their exposure to Chinaand they are looking to bring their supply chains closer to their final market, which is the United States, Canada and Mexico (….) And then Mexico is a great destination”, explained.
Source: Reuters
Source: Gestion
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