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News Article

Evergrande Hits Mexican Stock Exchange

By Emilio Aristegui | Tue, 09/21/2021 - 19:23

The recent financial catastrophe suffered by Chinese real estate developer Evergrande Group shook financial markets worldwide, including the Mexican Stock Exchange as the prices of gold, silver and copper plummeted. Mexican companies affected might face a difficult recovery.

Evergrande recently published an announcement on its website stating that “In view of the difficulties, challenges and uncertainties in improving its liquidity as mentioned above, there is no guarantee that the group will be able to meet its financial obligations under the relevant financing documents and other contracts.” The company is now facing major financial problems, while also affecting other entities. “The month of September is typically when real estate companies in China record higher contract sales of properties. However, the ongoing negative media reports concerning the Group have dampened the confidence of potential property purchasers in the Group.” The impact on other entities shook the world as markets contracted and companies lost value.

Evergrande’s downfall hit Mexican Stock Exchange Mining Companies, according to Bloomberg data. “Mining companies securities underperformed the expectations of the Chinese economy and the financial situation of the real estate company. In Friday’s session, the price of Grupo Mexico’s papers fell 4.18 percent on the Mexican Stock Exchange; Peñoles fell 1.32 percent; while Minera Frisco contracted 2.73 percent and Fresnillo dropped 1.04 percent.”

The prices of different materials dropped as well according to Bloomberg data: “In three days, gold fell 2.98 percent; while copper lost 1.13 percent.” Grupo Mexico has a severe dependance on copper as stated on its most recent quarter report. “Grupo Mexico is the fifth largest copper producer in the world, with the lowest cash-cost in the industry worldwide and has the largest copper reserves in the world.” Grupo Mexico was the most affected Mexican mining company from the recent financial market panic worldwide caused by the Evergrande Group.

The recent news on Evergrande Group represent another important challenge for the Mexican Stock Exchange, which has been operating under major uncertainty since the start of the COVID-19 pandemic. Since September 15, a day after Evergrande Group published its most recent financial announcement, Mexico’s main stock index contracted 1.02 percent according to official data from BMV. The Evergrande Group announcement had a severe impact on the Mexican Stock Exchange as the market shrank after the recent news of the Chinese giant came to light. Now, companies will have to endure a difficult period to recover from the effects of the company’s downfall.

The data used in this article was sourced from:  
Evergrande Group, Bloomberg, Grupo Mexico, BMV, IPC
Emilio Aristegui Emilio Aristegui Junior Journalist and Industry Analyst