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Only the Chilean and Taiwanese stock markets outperform the Mexican stock market, according to an analysis with accumulated data of 123 years.

Mexico is one of the most profitable emerging markets in the equity segment throughout history.

The Credit Suisse Research Institute analysis, called “Credit Suisse Global Investment Returns Yearbook 2023 Summary Edition”, contemplates statistics of 123 years and, although the beginning of coverage and statistics differs according to each nation, it is a fact that the years that our country has been part of history has stood out as one of the most profitable markets.

Mexico, in the third place of global profitability

The history of Mexico as an equity market worthy of being covered by Credit Suisse analysts begins in 1969; that is, 54 years ago.

Since then, the average annual rate of return in the Mexican market has stood at 8.5 percent.

This benefit is only surpassed by Chile, the most profitable country in history, whose coverage began in 1960, and despite episodes of political impact and the dictatorship, accumulates an average yield of 11.8 percent. It is, in fact, the only country that reflects a double-digit average rate.

The second most profitable country in history is Taiwan, with Credit Suisse’s start year of coverage in 1967 and an average rate of 9.5 percent.

However, Mexico is not alone in third place, it is accompanied by the markets of South Korea and Hong Kong. In the first case, coverage began in 1969, the same year as in Mexico; while for the second case, Credit Suisse’s start year was 1963.

Why is Mexico such a small market if it is so profitable?

Even though our country is one of the most profitable in the world throughout history, as the analysis prepared by Credit Suisse has shown, its size is smaller than the other places that accompany it in the ranking.

For example, the South Korean stock market capitalization is currently $2.18 trillion.

The same indicator for the Hong Kong market indicates a value of 3.663 billion, according to figures from the World Bank.

While, in the case of Mexico, the capitalization value is located at 460 billion dollars at the end of last year.

Since the Mexican market is so profitable, it is striking that it is so small compared to other global markets.

Some factors that explain it are the following:

High concentration in the market

Although, the national stock market has a little more than 100 listed issuers, without considering debt paper issues, in reality our market is limited to 35 stock issuers, of which a maximum of 10 are highly marketable. In other words, it is an excessively concentrated market.

Over regulation

Past experiences have led to over-regulation that hinders market development. For the sake of transparency and to minimize the risks associated with broadcasters, excessive regulation affects the market.

Low financial culture and distrust

A decisive factor is the low financial culture that exists in our country, associated with the distrust of investors in financial markets. A low market promotion is also added to this point.

The Credit Suisse data then speaks of a highly profitable Mexican market, capable of paying benefits of up to 235 percent per year as it did in 1999, but which is extremely small compared to other markets, incapable of taking advantage of the potential it has, such as the country.

Source: Alto Nivel