Investors optimistic about a potential Mexican nearshoring boom have been scooping up stocks in local real estate, transport companies, and banks, analysts say, in a bid to cash in on the wave of U.S businesses setting up shop over the border.
The trend has seen increasing numbers of companies move production closer to North American buyers – specifically to Mexico – and away from Asia, following supply chain snarls during the pandemic.
Among the biggest winners on the Mexican exchange are real estate companies like Vesta, which soared 22% in the first quarter, alongside Fibra Prologis – up 17% – and Fibra Terrafina – up 19%; outpacing the country’s main stock index 11% hike.
This pool of real estate REITs – or real estate investment trusts – own a high number of industrial parks and factories in the north which are reaching capacity thanks to an influx of manufacturing clients.
“REITS are the natural beneficiary from nearshoring,” Carlos Alberto Gonzalez Taberes, an analyst at Monex, says, as high demand for industrial parks in Mexico’s north push rents – and revenues – higher.
Fibra UNO, for instance, boasted 98% occupancy across its industrial property portfolio in the fourth quarter.
“I am very happy to say, and I would not like to sound to brag about (it), but we are in the best shape to receive whatever nearshoring throws at us,” Fibra UNO’s CEO Andre El-Mann Arazi said in its Q4 earnings call.
Carlos Peyrelongue, a Mexico equity analyst at Bank of America, says the REITs’ stock rally “is definitely from the nearshoring push”, given their exposure to the export industry.
TRANSPORT AND BANKS
Transport groups are another set of beneficiaries from nearshoring, analysts say, with several vastly outperforming the benchmark index.
Mexican airport groups Grupo Aeroportuario del Centro Norte soared 34% in the first quarter while Grupo Aeroportuario del Pacifico was up 27%, outpacing European peers like Aeroports de Paris and Fraport.
At least part of these companies’ growth is coming from nearshoring, the CEO of Grupo Aeroportuario del Centro Norte said in its fourth-quarter earnings call, with airport traffic growing faster in northern states like Nuevo Leon and Chihuahua.
“The impact within nearshoring – that is real,” CEO Ricardo Dueñas said. “The traffic performance in the last few months, (at) nearshoring destinations (like) Ciudad Juarez, are growing at a much larger percentage than the average.”
Meanwhile, GMexico Transportes – the transport arm of conglomerate Grupo Mexico – was up 11% versus the same period last year.
Peyrelongue says investors are watching the company closely, given it has the largest railroad network in Mexico and is well placed to profit from a boom in cross-border trade, aided by Mexico’s wealth of free trade agreements.
Local bank stocks are also seen as winners from the nearshoring push, though they have recently come under pressure because of concerns about global financial stability.
Gonzalez says top financial institutions are expected to benefit from the national economic tailwind, with total exports up 12% annually at the end of 2022.
Peyrelongue says regional banks like Banco Regional in particular are set to benefit as northern hubs, which should see an increase in commercial loans from nearshoring.
One of Mexico’s largest banks, Banorte, also says it’s gearing up to reap the benefits of nearshoring, saying last week that it plans to hire 800 new staff to meet nearshoring demands, including to finance infrastructure.
Source: El Financiero