Notes on Mexico Stock Exchange

One of the few stock exchanges trading at a reasonable valuation, 12-15X earnings.  And it belongs to a country which benefits from de-globalisation, as Mexico takes on the low-end manufacturing role in USMCA.

Business and Revenue Breakdown

The Mexican exchange is primarily for trading debt.  The equity market is dead, with zero IPOs (both BMV and BIVA) from 2022 till today (excluding spin offs).  Companies would rather list in the US.  The revenue breakdown from debt and equity is not disclosed.

Summary of their segments:

BIVA

Competing exchange BIVA was launched in 2018.  BIVA handles stocks (incl. warrants), bonds and ETFs, but not derivatives.

Its not a competing exchange like the NASDAQ is to the NYSE.  BMV and BIVA operate under a "Multi-Exchange" model where all stocks are cross-listed and traded on both platforms simultaneously. They compete primarily on trading fees, technology, and service quality rather than exclusive company listings; for example, a stock listed on the BMV can be executed on BIVA and vice versa. Orders are routed by broker-dealers using Best Execution Rules mandated by the government, which require algorithms to scan both order books in real-time and route to the venue offering the best price, highest volume, or highest probability of execution at that millisecond. One trade may be split into parts, each handled by a different exchange.

This means that, while a company is listed on either BIVA or BMV, it can be traded on both exchanges.  Regardless of where it was traded, settlement and custody is performed by BMV (Indeval).

Average daily trading volume for BMV in 2025 was 17.2bn (p3).  For the entire Mexico market, it was 21.5bn (also p3).  So BMV had an 80% market share of transactions by volume.

Financials

Typical of an exchange, they have have 30+% operating margins, low D&A, and no debt.   They pay the majority of earnings as dividends.

Valuation

2025 EPS was 2.88.  At MXN 40, the trailing PE is 13.8.  The PEs for 2024, 2023, 2022 and 2021 would be 13.8, 15.2, 13.9 and 14.7 respectively.

Dividends for each year are payed out the following year.  It is usually confirmed in the AGM late April.  The payout ratio is usually 70-80%, but may be lower this year.  At a 60% payout ratio, the yield would be 4.3%.

Risks

• Market downturn, reduces trading volume.
• Theres a risk after June that USMCA will be torn up, due to Canada.  I believe the US will ultimately make accommodations for Mexico, as they are needed for low cost manufacturing.  But the share price may react.
• Fentanyl and cartels.  Mexico is corrupt and government figures may be involved with the cartels.  Trump could "raise this as an issue", in his own special style.  I believe that the US cannot send troops into Mexico, and they would either have to rely on the Mexican government, or negotiate directly with the cartels.  But if this issue becomes news meanwhile, expect Mexican stocks to be hit.

The upside is that long term, Mexico's economy grows as part of USMCA, and the companies issue more tradable debt.  Plus it would be a bonus if their moribund stock market wakes up, though I wouldn't count on it.

Paperwork

Previously I paid 30% WHT on dividends from Mexican stocks, even though the official rate is only 10%.  As a Singapore resident, I may need to apply for a COR from IRAS and check with Interactive Brokers.  TBD.

Conclusion

Last week I bought a 5% position.  I categorize it under "Long term Fundamental Investments".  Could hold it forever.  The "LATAM" category stocks are more medium-term bets, usually with a political catalyst.