Jaime Ruiz Sacristán, President, Bolsa Mexicana de Valores (BMV): Interview

Interview: Jaime Ruiz Sacristán

Why is the ratio of exchange capitalisation to GDP so low, and what is being done to reverse this?

JAIME RUIZ SACRISTAN: The companies listed on the BMV have a capitalisation equal to 44% of GDP, much lower than in countries like Brazil and Chile. This is largely because the number and value of firms listed on the BMV is very low compared to the country’s economic activity. Also, many important sectors of the economy, such as energy, were unavailable for the exchange until recently. Listing more companies is therefore the greatest challenge for the BMV and the intermediaries that work to achieve this. The BMV, intermediaries and government authorities are looking to showcase the benefits of listing through road shows, specialised forums and promotional activities with business leaders from various sectors, and through programmes and incentives.

How will Mexico’s energy reforms affect the BMV?

SACRISTAN: Energy reforms will lead to private-sector investment in the industry, attracting a substantial number of companies that will want to invest in the opportunities created. These companies will require different financial mechanisms to develop their activities, with the BMV being one of the most attractive. The exchange can help finance projects in the oil and gas sector through structured equity securities, capital flows and initial public offerings from local companies and subsidiaries of international ones with a presence in Mexico. We believe this will lead to a medium-term increase in the number of companies listed on the BMV, and will offer investors new ways to invest in oil and gas assets.

What have been the effects of Mexico’s Real Estate and Investment Trusts (Fideicomiso de Inversion y Bienes Raíces, FIBRAs) on the BMV?

SACRISTAN: FIBRAs are innovative instruments that have had a strong impact on the stock exchange and capital markets. They have created a link between the stock exchange and the real estate market, helping channel large amounts of resources into developing Mexican gy, were unavailable for the exchange until recently. List-real estate. Since they were launched, regulation has been improving in terms of corporate governance, information exposure, emission structure and, most recently, levels of indebtedness, in order to reach international standards, thus allowing more investments from international sources. The potential is vast, since there are a large number of real estate assets in the hotel, industrial, commercial and tourism sectors that could form part of FIBRAs’ portfolios.

What benefits does the Latin American Integrated Market (Mercado Integrado Latinoamericano, MILA) have to offer for Mexico?

SACRISTAN: MILA is an initiative started by the stock exchanges of Chile, Colombia and Peru and recently joined by the BMV. It is the first phase of a regional integration project that will allow investors from the Pacific Alliance countries to invest in the four capital markets, enabling investors to diversify their portfolios and regional companies to raise capital. The greatest challenge is advancing in a coordinated fashion to reach a higher degree of standardisation and harmonisation of operations, liquidity, custody and transactions.

As more retirement funds may now move overseas, to what extent is this a loss for domestic markets?

SACRISTAN: The law regulating pension funds, Afores, allows them to invest portfolio resources and investments in international markets, including foreign stock listed in foreign markets. Far from being a lost opportunity, we believe this is a natural and positive step because it will allow pension funds to diversify their investments and thereby reduce their portfolio risk. Many years ago, the BMV developed an operational platform called Mercado Global BMV, which allows pension funds, or any Mexican investor, to make foreign investments through the BMV’s screens and systems using the accounts they already own. This platform has eased the administrative and liquidity processes and should lead to a higher degree of investment in international markets.