Mining companies in Mexico have taken the lead in the rankings of the Mexican Stock Exchange (BMV) due to the rise in the costs of key metals. Experts argue that although there is an increase in risk-taking decisions by investors, the outlook of the mining sector remains subdued due to the volatility of metal prices and the fear of an economic recession.
Currently, Industrias Peñoles and Grupo México are the two issuers in the S&P/BMV IPC index, which considers the 36 main companies listed on the Mexican Stock Exchange that have had the best performance so far in 2023. Industrias Peñoles’ shares are up 21.55 percent, at MX$291.30 (US$15.19), while Grupo México has gained 18.35 percent, reaching MX$80.96 (US$4.22).
Experts indicated that these mining companies had a solid performance on the BMV due to the increase in the prices of metals such as gold and copper, as well as the reopening of commercial activities in China. In 2023, the gold price increased by 2.7 percent to US$1,875.55/oz, while the copper price increased by 5.10 percent to US$8,866/oz. Experts said these factors have boosted the appetite for riskier investment decisions.
“This performance is mainly related to the news of the reopening of some economic activities in China, which generates the expectation that there will be greater demand for industrial materials such as copper. In addition, metal prices such as gold have risen,” said Jacobo Rodríguez, Director Analysis, Black Wallstreet Capital.
Alain Jaimes, Senior Analyst, Signum Research, said that although mining companies have not received significant investment in recent years due to COVID-19, they are now becoming popular as the market outlook has started to improve. For this reason, companies such as Grupo México or Industrias Peñoles, with a solid balance sheets and attractive profits, have been the main beneficiaries.
However, Rodriguez emphasized that the outlook for 2023 for mining players remains neutral due to the volatility of market prices and a looming economic recession. "The BMV looks like an adequate investment option in 2023 because it keeps its 'cheap' valuations, Mexico has healthy public finances and the exchange rate remains strong. However, the rising cost of inputs, the limited margin to pass on prices to the end consumer and an economic scenario with recessionary overtones could mean that it will no longer register sharp increases, at least this year," said Rodríguez.