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Mexico: Stock Exchange
Country Study > Chapter 3 > The Economy > Financial System > Stock Exchange

STOCK EXCHANGE


Shortly after taking office, President de la Madrid allowed the establishment of private brokerage houses with wide latitude to conduct financial transactions in domestic capital markets. That action laid the foundation for the first significant stock market in Mexican history, the Mexican Stock Exchange (Bolsa Mexicana de Valores -- BMV). Following several years of dynamic growth, the BMV's leading index fell sharply as a result of the October 1987 United States stock market crash. The BMV recovered slowly in 1988, then surged ahead from 1989 through 1991. By the early 1990s, the BMV had become one of the world's fastest growing stock exchanges. During 1991 the index of traded stocks rose 128 percent in new peso terms and 118 percent in United States dollar terms. Analysts attributed the stock market's buoyancy to increased confidence in the economy and to expectations of lower interest rates and approval of NAFTA.

In 1992, 199 companies were listed as trading on the stock exchange. A total of 11 trillion new pesos were traded, and the exchange had a total capitalization of US$139 billion and a price-to-earnings ratio of more than thirteen. The total value of stocks traded increased by US$191 billion between 1987 and 1993. Treasury bills, bank acceptances, and commercial paper were the most common instruments traded. At the end of 1993, Mexican investors held about 75 percent of the equities traded. Although the value of Mexican-owned stocks rose by about US$143 billion between 1987 and 1993, only 0.2 percent of all Mexicans had brokerage accounts at the end of 1992.

The BMV's market value stood at about US$200 billion at the end of 1993. Analysts attributed the rise partly to expectations of higher profits resulting from a 1 percentage point reduction in the corporate tax rate, lower energy prices for industrial users, and euphoria over the passage of NAFTA. Despite a setback induced by the January 1994 Zapatista rebellion in the state of Chiapas, the BMV continued its strong growth in early 1994. Beginning in March, however, the market was buffeted by a series of political shocks -- including two high-profile political assassinations, revelations of high-level corruption in President Salinas's entourage, and continued unrest in Chiapas -- that contributed to its high volatility throughout the rest of the year.

The stock market was further buffeted by the collapse of the new peso in early 1995, causing the stock index to fall to less than 1,500 points in February of that year. The main stock index gradually recovered to just under 3,000 points by the end of 1995 and had reached 3,300 by September 1996. Mexican stocks gained 24 percent in dollar terms during the first eight months of 1996. Mexico's stock market had a US$70 billion capitalization in September 1996, according to Morgan Stanley Capital International indices.




Last Updated: June 1996


Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for Mexico was first published in 1996. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on Factba.se.

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