Share repurchases continue to grow among companies that are part of the Price and Quotation Index (IPC) of the Mexican Stock Exchange (BMV), as a vehicle to reward their shareholders; however, the stock market in the country is shrinking more.
Share repurchase activity in November reached record levels in Mexico. The companies that are part of the IPC of the stock market bought their own securities for 9,449 million pesos the previous month, the highest amount in the last four years, 38.5 percent more than that registered in October, revealed Omar Taboada, director of Investment Analysis of Citibanamex Casa de Bolsa.
“Even though the level of buybacks was at maximum, these are explained mostly by the participation that América Móvil has had, since in November it represented 51.6 percent of the total IPC buybacks and its participation has averaged 61 percent since November of last year, derived from the use of its fund of resources for the acquisition of own shares ”, detailed the specialist of the stock market intermediary.
Thus, by excluding the Mexican telecommunications multinational América Móvil from the IPC repurchased amount, in November the companies registered a total of 4,570 million pesos. Although the figure was still below that registered in March 2020, when the companies repurchased 6 thousand 956 million pesos, with the exception of América Móvil.
In the 11 months of the year, the accumulated amount for repurchases has been 51 thousand 498 million pesos and has exceeded the 25 thousand 169 million registered in the same period of 2020.
Among the local companies with the greatest adjustments (and that took the opportunity to buy back the attractive valuation levels in which their shares were trading), Orbia stands out, with five business groups: construction and infrastructure, data communications, chemical products, since it repurchased 8.6 times more than your average amount in the last four years; Grupo Aeroportuario del Pacífico (GAP) eight times, and Chedraui, 7.8 times, among the main ones.
The companies that have given the best return on the repurchase of their shares are Gruma, 3.84 percent; Inbursa, 3.65; GAP, 2.47; Orbia, 2.21; Quálitas, Pinfra, Bimbo, Oma, Bolsa and Genomma Lab, 2.12, 2.07, 0.97, 0.92, 0.70, 0.70 percent, respectively.
Stock market shrinks
The lower the CPI level, the companies themselves go out to buy back their shares and there may even be stock market failures: both effects are already reflected in the Mexican stock market.
“The repurchase of shares is not something that makes us happy because in the end, when the issuers buy back their shares, the local market shrinks instead of growing,” explained José-Oriol Bosch Par, CEO of the BMV a few months ago.
He added that “when the IPC is very high, there are issuers ready to go on the stock market, but when it is down, the buyback of shares is activated and those titles go out of circulation. That rule does not fail ”.
The shareholder was lucky, since this vehicle, traditionally used as an indirect way of rewarding the shareholder, became a way to boost the price, but it is detrimental to the market.
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