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Cerrar panel BBVA Research * Markets * Credit Desk Strategy * Credit Strategy * CDS Strategy * Equity * Equity Cash * ESG * Flow Derivatives * FX Strategy * Global Strategy / Asset Allocation * Global Structured Solutions * Macro * Sovereign Strategy * World Stocks Dashboard * Regions * Europe * Americas * Forecast * Events * Who we are BBVA Research * Listas de lectura Mr(s) User Name My Subscriptions Reset Password Change Email Logout GLOBAL MARKET STRATEGY BBVA Research * Markets * Credit Desk Strategy * Credit Strategy * CDS Strategy * Equity * Equity Cash * ESG * Flow Derivatives * FX Strategy * Global Strategy / Asset Allocation * Global Structured Solutions * Macro * Sovereign Strategy * World Stocks Dashboard * Regions * Europe * Americas * Forecast * Events * Who we are Ver menu principal Buscador * Login GLOBAL MARKET STRATEGY Webinars Today: 16:00 - Teams - Tips for Working Remotely 17:00 - Teams - Tips for Working Remotely 05/11: 17:00 - Teams - Tips for Working Remotely Buscar No featured market asigned yet FIND DOCUMENTS QUICKLY AND EASILY Click here to search by market, region, analyst, subject and more * Home * Last Reports Filter publications 2022-09-01 Mexican Flash (REAL ESTATE, TRANSPORT) In the spotlight Real Estate: Positive trends amidst challenging conditions The sector is likely to continue to face an adverse rate cycle at least until 1H23, in our view. This should continue to represent relevant headwinds for the sector’s valuations in coming months. Sector news Transport: Rails W34: USMCA carloads as of 27/08/2022 BBVA Market Strategy * Market Title * Equity Cash * Americas * Mexican Flash * Mexico * Daily 2022-09-01 Global FX Daily - Fears about China trigger a spike in risk aversion dragging high-Beta currencies – EURUSD experiences volatility but prolongs the two-week consolidation phase around parity – GBP gets no respite as risks aversion dominates – LatAm FX momentum lost; August returns were mixed – CLP volatility likely to continue Alejandro Cuadrado * Market Title * FX Strategy * Americas * Europe * Daily * Type of file to download * Files 2022-09-01 Real Estate. Positive trends amidst challenging conditions The sector is likely to continue to face an adverse rate cycle at least until 1H23, in our view. The traditional (negative) correlation between interest rates and the sector valuation has resumed. On the operating front, the sector continues to recover and the gap among segments is closing further. In this document, we have revised our estimates, valuation inputs and introduced our YE23e TPs for the nine companies under coverage. We maintain our selective approach to the sector. Top picks. Deep value for patient investors. Our Market Perform list. Our Underperform name. Francisco Chavez * Market Title * Equity Cash * Americas * Mexico * México Real Estate * Real Estate * Fibra Danhos * Fibra MQ * Fibra Prologis * Fibra Hotel * Fibra Monterrey * FibraShop * Fibra Uno * Terrafina * Gicsa * Emptyname 2022-08-31 GMXT: Rails W34 - USMCA carloads as of 27/08/2022 USMCA rails traffic data for the 34th week of 2022 (W34, ending 27 August) Jean Bruny * Market Title * Equity Cash * Americas * Mexico * Transportation * México Industrials * GMXT * Weekly 2022-08-31 BBVA Early Warning Indicator Daily update of BBVA's new methodology to determine changes in short term volatility. Ana Munera * Market Title * Flow Derivatives * Europe * EWI * Daily 2022-08-31 SPGB Auction Preview - 31 August Tomorrow, the Spanish Tesoro plans to auction EUR4.0bn-EUR5.0bn of its 3Y, 10Y, and 30Y benchmarks together with EUR0.25bn-EUR0.75bn of its 15Y linker. Assuming it issues in the middle of the range, this would take Spain’s YtD issuance to c.76% of its total funding needs for FY22e (EUR148.1bn). Pablo Zaragoza * Market Title * Sovereign Strategy * Europe * SPGB * Auction Preview * Emptyname * Files 2022-08-31 Global FX Daily - Expectations of a hawkish ECB and lower energy prices provide some relieve to the EUR – EURUSD holds above parity ahead of EMU inflation data – Cable reaches the lowest level since March 2020 on hawkish Fed and ECB remarks – CLP the exception, increasingly pricing in rejection – Banxico’s inflation outlook should give some more guidance for rates Silvia Gonzalez Mora * Market Title * FX Strategy * Americas * Europe * Daily * Type of file to download * Files 2022-08-31 Mexican Flash (BANORTE, FIBRAPL) In the spotlight Banorte: With no need get into a dogfight, Outperform We have set a YE23e TP of MXN155, from MXN150 for YE22e, and are reiterating our Outperform rating on the stock. We have revised our estimates to incorporate our expected path for interest rates, a higher gearing towards consumer products, and a more cautious view on insurance (especially in pensions), which has resulted in a modest revision of 1.7% to our 2022-26e aggregate net profit estimates. We have also incorporated a higher cost of equity to our valuation to reflect higher risk-free rates and equity-risk premiums. Company news FIBRAPL: Launches rights offering for c.USD660mn. Reiterate MP BBVA Market Strategy * Market Title * Equity Cash * Americas * Mexico * Mexican Flash * Daily 2022-08-30 Banorte: with no need to get into a dogfight, Outperform We have set a YE23e TP of MXN155, from MXN150 for YE22e, and are reiterating our Outperform rating on the stock. We have revised our estimates to incorporate our expected path for interest rates, a higher gearing towards consumer products, and a more cautious view on insurance (especially in pensions), which has resulted in a modest revision of 1.7% to our 2022-26e aggregate net profit estimates. We have also incorporated a higher cost of equity to our valuation to reflect higher risk-free rates and equity-risk premiums. We believe that Banorte is well equipped to grow, generate value and maintain a competitive position on a standalone basis, on the back of: i) stable loan growth with robust asset quality; ii) proficient asset-liabilities management through the interest rate cycle, iii) a diversified business model; iv) focus on efficiency; v) capital management; and vi) digitalisation. We estimate Banorte, in a no acquisition scenario, has room to optimise its well-capitalised balance sheet, further improve RoE and RoNAV metrics, pay high dividends (11.1% yield for 2023-26e) and render a 28.7% IRR through YE24e, which is higher than the one we compute for its peers and the IPC as a whole. Whilst we reckon there is huge potential to reap synergies and funding savings from a merger with Banamex, we believe Banorte is far from being in a desperate position to overpay for Citigroup’s assets and argue that the global developments between January and today should command a lower valuation, not higher. Rodrigo Ortega * Market Title * Equity Cash * Americas * Mexico * México Financials * Grupo Financiero Banorte * Emptyname 2022-08-30 FIBRAPL. Launches rights offering for c.USD660mn. Reiterate MP The transaction. Fibra Prologis launched a capital expansion today through a rights offering (current CBFI holders will have the right of first refusal) for 255mn of CBFI at a subscription price of MXN52/CBFI. If fully executed, this capital expansion would be equivalent to MXN13.26bn or c.USD662mn based on the FX rate as of 19 August. CBFI holders as of 14 September will have the right or preference to participate in the transaction, which will be executed in the second half of September and FIBRAPL’s sponsor (Prologis) has stated its intends to participate in order to maintain its current 47.2% ownership in the vehicle. The transaction price implies slight discounts of 2% vs. yesterday’s closing price and 6% vs. last month’s average, and implies a 0.8 P/NAV. Taking the right steps to continue its expansion plan. If fully executed, FIBRAPL expects to obtain c.USD630mn of net proceeds, of which c.USD400mn will be used to acquire industrial properties in 4Q22-1H23, and to pay down debt of c.USD230mn. We reiterate our Market perform rating. Francisco Chavez * Market Title * Equity Cash * Americas * Mexico * México Real Estate * Real Estate * Fibra Prologis * Emptyname 2022-08-30 Global FX Daily - Quiet start to the week in the G10 FX ahead of month end – EURUSD remains magnetised by parity ahead of the German CPI data – Safe-havens performance diverge as flows play in opposite directions for CHF and JPY – LatAm resilience reinforced – IMF approves FCL for Chile; polls still show rejection ahead of key referendum Roberto Cobo * Market Title * FX Strategy * Americas * Europe * Daily * Type of file to download * Files 2022-08-30 Mexican Flash (OPSIMEX, METALS) In the spotlight Opsimex: Increasing concerns about tenancy ratio stagnation We have adjusted our estimates and rolled over our valuation to YE23e with a TP of MXN27.00/sh (vs. MXN30.00 for YE22e), and maintain our Market Perform recommendation. Metals: ICH and Simec valuation update After having benefitted from two stellar years, driven by resilient demand and historically high prices, the steel industry is set to face a complex environment threatened by not only the correction of steel prices, but also by the expected lower volumes as demand eases amid an environment of low economic growth. We set our FY23e TP after having incorporated the 1H22 results of both names and having rolled over our valuation period to 2023-32. We set a YE23e TP of MXN184.00/share from MXN170.00 in YE22e for ICH and MXN154.00/share from MXN149.00 for Simec. We maintain our Underperform calls on both companies in the back of a valuation that in our view does not reflect the increasing number of headwinds and the potential profitability declines that the overall sector will have to face. BBVA Market Strategy * Market Title * Equity Cash * Americas * Mexican Flash * Mexico * Daily 2022-08-30 Steel Sector Report: ICH/Simec Valuation Update YE23e After having benefitted from two stellar years, driven by resilient demand and historically high prices, the steel industry is set to face a complex environment threatened by not only the correction of steel prices, but also by the expected lower volumes as demand eases amid an environment of low economic growth. We set our FY23e TP after having incorporated the 1H22 results of both names and having rolled over our valuation period to 2023-32. We set a YE23e TP of MXN184.00/share from MXN170.00 in YE22e for ICH and MXN154.00/share from MXN149.00 for Simec. We maintain our Underperform calls on both companies in the back of a valuation that in our view does not reflect the increasing number of headwinds and the potential profitability declines that the overall sector will have to face. Pricing and demand deterioration. In early April, steel prices reached a YtD high of USD1,541/tn which has since fallen to USD806/tn in August, implying a correction of 48%. In our view, this level could be near the bottom, since some steelmakers in the US have already announced price increases. Moreover, during past corrections, steel prices fell c.50% and then followed a stabilisation path. Our estimates point to a long-term steel price of c.USD950/tn from FY23e onwards, a level which we believe is fundamental for steelmakers’ sustainability in the long term. Simultaneously, restrictive monetary policies around the globe to mitigate inflationary pressures should impact steel demand in key sectors like the construction and automotive industries. Amid pressure on input costs. On top of the complex conditions of pricing and demand, steelmakers are also facing headwinds from inflationary costs that threaten the record-high margins that ICH and Simec have registered in the last 18 months. As such, given the worsened environment and the fact that we had always attributed the stellar operating performances of both names to industry conditions, rather than to a fundamental visible strategy of the names, we believe that current valuations are not justified. Montserrat Araujo * Market Title * Equity Cash * Americas * Mexico * Mining * México Industrials * ICH * Simec * Emptyname 2022-08-29 BBVA Strategy: The reversal of the summer rally…but with growing decoupling of European assets Despite the rapid market rotations and the rally in global risk assets over the summer, if we look at the current asset price relative to those before the summer we see that equity and credit spread levels are midway between our central and bull scenarios of 4,000 and 4,400 respectively, with US 10Y rates almost back to our fair value levels between 3.0-3.5%, after having fallen to the lower end of the ranges at 2.60%. The odds of a Goldilocks outcome for the US economy increased somewhat in August, but market implied expectations of FED rate cuts in 2023 are moderating as inflation is going to be stickier than currently reflected in forward breakevens. In our view, this means, as stressed by Chair Powell in Jackson Hole, that upward pressure on rates will continue in 2023. That said, we remain neutral on US equity markets (see our latest House View report - link) until we have more visibility on the inflation/rates peak. The rapid depreciation of the euro (-19% vs. USD and -9% in NEER terms from early 2021 highs) is, in our view, the clearest indication of to what extent recession probabilities have been revised upward in Europe (both in absolute and relative terms vs. RoW), as gas prices reach new historical highs. Gas futures have risen more than 50% over the past month as fears about Russian supply, combined with adverse weather factors, dominate the market. This upward revision to our gas price forecast is not only having an impact on European growth and inflation over the winter and 2023, as it is also driving renewed outflows from Europe. This combination of factors is driving the fair value level of the euro toward levels below parity vs. USD. Turning to Europe, the euro weakness has contributed to keeping European earnings expectations more resilient, driving some outperformance of the cyclical sectors over the short term. However, this is not enough to chase the cyclical rebound seen in European equities and, in our view, would justify a repositioning towards a more defensive stance. Actionable idea: we are looking for European companies that could benefit from a weak euro in defensive sectors and at attractive valuations. We believe investing in companies with a high sales weighting outside Europe, particularly prioritising more defensive and inflation-related sectors (such as health care) and compelling valuations, given the current volatile market, could be a wise choice to take advantage of the weak euro. Ana Munera * Market Title * Global Strategy / Asset Allocation * Americas * Europe * Cross Asset * Central Banks * Inflation * Interest rates * EUR * USD * Emptyname * Files 2022-08-29 Mexican Stock Screening 29/08/2022 LatAm Equities / A guide to finding value in Mexico BBVA Market Strategy * Market Title * Equity Cash * Americas * Mexico * Mexican Stock Screening * Weekly 2022-08-29 MX - Discussion Topics: The economy remains in expansion mode, but soaring food prices catapult inflation Last week: August bi-weekly inflation and 2Q22 GDP * Inflation in the first fortnight of August rose 0.42% FoF. The main drivers of the high inflation print included sharp increases in the price of processed food, other goods, fresh produce and other services. As core items were the main drivers of the surprise, inflation pressures could be more persistent than expected in the coming months. * Mexico’s GDP expanded 0.92% in 2Q22, with the services sector contributing the most (up 0.92% QoQ); industrial production and primary activities expanded 0.86% and 0.94%, respectively, compared with the previous quarter. While we still see upside for the economy in 2022, we believe medium-term risks for growth are looming as investment remains low amid tightening monetary conditions and a global slowdown. Market Strategy: Banxico minutes * Banxico minutes: 75bp at September’s meeting is likely. Credit * Axtel (B1/BB-/BB) downgraded to BB- from BB by S&P. * KOF (A3/A-/A) announced tender offer for up to USD250mn. * Cemex (Nr/BB/BB+) will make new investments to reduce GHG. Claudia Ceja * Market Title * Global Strategy / Asset Allocation * Americas * Mexico * Weekly * Type of file to download * Files 2022-08-29 Dashboard Global Stocks Only use BBVA BBVA Market Strategy * Market Title * World Stocks Dashboard * Americas * Europe * Dashboard * Emptyname 2022-08-29 European Periphery Weekly - Insights + weekly supply + week ahead - 29 August The macro picture: no improvement (and even some deterioration) during the summer. The high-risk scenario for growth and inflation remains intact. Meanwhile, the main factor to monitor is the potentially negative effect that may derive from any sort of disruption in the supply of energy (and more specifically gas) to Europe over the next few months/quarters. Moreover, the PMI and economic confidence indicators to be published this week will very likely confirm that manufacturing activity has stalled in most EU countries over the summer and that services are losing ground. As for inflation, the current combination of circumstances continues to paint a rather bleak picture, as not only has inflation definitively not peaked yet but also the timing for this peaking is now increasingly uncertain. Central banks: when facing the inflation/recession conundrum they still prioritise the former. In our view, the ECB will play “hard” in 2H22 but maybe not as strong as the market expects (we see 75/100bp of additional hikes left this year) and definitely not as hawkish in 2023. Periphery: unavoidably heading towards the perfect storm? Market dynamics in August have shown a certain bias in core-peripheral spreads towards the upper bounds of their recent ranges but not any relevant attempt to breach them. Moreover, the periphery continues to find in the ECB’s anti-fragmentation tool an important underlying supportive element that limits the risk of any material sell-off. All in all, our outlook is that despite the underlying shelter offered by the ECB, valuations look increasingly challenged. Market developments: although nominal yields are not collapsing, the recession threat is increasingly reflected in the curves. In our view, the short-term outlook of recession plus inflation risk combined with potential political noise in Italy should extend the recent performance of real rates. The only element contributing to avoiding a sharp downward correction in nominal yield will be breakevens, as they will still reflect the uncertain scenario about when and where inflation will peak. Weekly supply: on the bills market, Germany and France will be active. Total issuance will be c.EUR20.00bn in gross terms and c.EUR3.22bn in net terms. On the bonds market, the EU, Germany, France, Italy, and Spain will be active and total gross issuance will be c.EUR24.35bn in gross terms and c.EUR4.76bn in net terms. Pablo Zaragoza * Market Title * Sovereign Strategy * Europe * Periphery Weekly * Emptyname * Files 2022-08-29 Global FX Daily - FX markets head into September with the USD as king – EURUSD plays with parity as recession fears dominate – Broad-based depreciation of the GBP in August on a deteriorating domestic landscape – LatAm shows encouraging dynamics compared to other EMs but is not completely immune to king USD – BRL, MXN preferred to less liquid, noisier Andean currencies – Watch the CLP before and after the referendum Alejandro Cuadrado * Market Title * FX Strategy * Americas * Europe * Daily * Type of file to download * Files 2022-08-29 Innovation: it takes knowledge to make money Throughout human history, innovation, once defined by Peter Drucker as "change that creates a new dimension of performance", has acted as one of the main levers of real progress and source of economic growth and helps us understand the society we live in today. The innovation process involves the acquisition, dissemination and use of new and valuable knowledge. Thus, knowledge is one of the main requisites for innovation. Bringing together innovation and knowledge in the stock market leads us to the interesting concept of the "Knowledge Effect", which is defined as the tendency of highly innovative companies to outperform the market and generate abnormal returns over the long term. Indeed, these companies, known as knowledge leaders, have managed to outperform global stock markets by 70% over the last decade. By analysing the impact of knowledge on markets over the long term, we realise there are two key drivers that allow knowledge-leading companies to beat the market and be rewarded over the long term. These drivers are a strong commitment to properly invest in knowledge production (such as R&D investment) as well as the ability to capitalise on the value of intangible assets (often hidden and undervalued by the market). We believe these innovative and high-quality stocks are an appealing investment in the current very volatile markets – in which after the recent vigorous rally we are trading above our House View 2H22 target levels, hence some corrections seem likely. Their strong commitment to R&D is by itself a clear inflation hedge, enabling them to effectively pass on inflation costs to customers and therefore protect their margins and EPS growth. Moreover, when looking at these knowledge leaders from a valuation perspective we note that they are currently trading at reasonable multiples (12-month forward P/E of 18x, mostly in line with their 10-year historical average and global benchmarks). However, we believe that we can still find good entry points at these levels given the solid EPS growth expectations (+7.5% EPS CAGR 2022-24 consensus estimates) coupled with the opportunity to profit from the benefits of capturing the Knowledge Effect and thus earn steady returns over the medium to long term. Carlos Lopez Ramos * Market Title * Equity * Americas * Europe * House View * Quality * Emptyname 2022-08-29 OPSIMEX (SITES1): Increasing concerns about tenancy ratio stagnation We have adjusted our estimates and rolled over our valuation to YE23e with a TP of MXN27.00/sh (vs. MXN30.00 for YE22e), and maintain our Market Perform recommendation. Alejandro Gallostra de Arnedo, CFA * Market Title * Equity Cash * Americas * Mexico * México Communication Services * Telesites * Emptyname 2022-08-26 MX - 2Q22 GDP: The economy remains in expansion mode Mexico’s GDP expanded 0.92% in 2Q22, with the services sector contributing the most (up 0.92% q/q); industrial production and primary activities expanded 0.86% and 0.94%, respectively, compared with the previous quarter. While we still see upside for the economy in 2022, we believe medium-term risks for growth are looming as investment remains low amid tightening monetary conditions and a global slowdown. Susana Flores * Market Title * Macro * Americas * Emptyname * Files 2022-08-26 Mexican Flash (ALSEA 2) In the spotlight Alsea: Still positive despite recession fears TP to MXN45.00. We set our YE23e TP at MXN45.00, down from our YE22e TP of MXN53.00, but stick to our Outperform rating on the name after including a more conservative scenario in the short and medium run. Despite recession fears, we believe Alsea’s outlook is clearer after better-than-expected 1H22 results, full compliance with 2022 guidance (revenue growth > 20%, an EBITDA margin > 13% (pre-IFRS 16), 170-200 new stores and MXN4.8bn capex), its debt restructuring and the decreasing risk of the pandemic. BBVA Market Strategy * Market Title * Equity Cash * Americas * Mexican Flash * Mexico * Daily 2022-08-25 Alsea. Still positive despite recession fears. YE23e TP MXN45.0 TP to MXN45.00. We set our YE23e TP at MXN45.00, down from our YE22e TP of MXN53.00, but stick to our Outperform rating on the name after including a more conservative scenario in the short and medium run. Despite recession fears, we believe Alsea’s outlook is clearer after better-than-expected 1H22 results, full compliance with 2022 guidance (revenue growth > 20%, an EBITDA margin > 13% (pre-IFRS 16), 170-200 new stores and MXN4.8bn capex), its debt restructuring and the decreasing risk of the pandemic. Miguel Ulloa * Market Title * Equity Cash * Americas * Mexico * México Consumer Discretionary * Alsea SAB de CV * Emptyname 2022-08-25 Mexican Flash (HERDEZ 2) In the spotlight Herdez: New YE23e TP, reiterate Outperform We are updating our Herdez estimates, and we now project an 8.8% 2021-26e EBITDA CAGR and a 0.7pp EBITDA margin expansion. Having said that, we have set our new YE23e TP at MXN49.50/sh. (MXN50.50/sh. previously for YE22e) and reiterate our Outperform recommendation. We support the positive stance on this name on the back of the defensive nature of the core division (Preserves 86.0% of 2023e EBITDA), the projected operating expansion, including a solid FCF generation (2022-26e annual avg. yield: 14.8%), combined with an over punished valuation; at 6.7x in terms of 2023e adjusted EV/EBITDA, Herdez trades at 22.3% and 9.9% discounts vs. its five-year average and the regional peers’ mean. BBVA Market Strategy * Market Title * Equity Cash * Americas * Mexican Flash * Mexico * Daily 2022-08-24 MX: Inflation soars as food prices continue to climb In August’s first fortnight, inflation increased 0.42% fof, above market consensus (0.32% f/f) and our forecast (0.30% f/f). In annual terms, headline inflation accelerated further during the first half of the month, reaching 8.62%. Core inflation was 0.49% fof, increasing in annual terms to 7.97%. This print is substantially higher than the 0.18% fof average of August’s first fortnights during the previous 10 years. The main drivers of the high print included sharp increases in the price of processed food, other goods, fresh produce and other services. As core items were the main drivers of the surprise, inflation pressures could be more persistent than expected in coming months. Within core inflation, processed food prices remain the most pressured due to the still high price of grains and other commodities and the market structures that enable a substantial pass-through to consumers. During the fortnight, the annual inflation of processed food gained further momentum and reached 12.73% y/y. While international prices have eased recently, this moderation will only be noticeable in local prices with a lag of several months. In addition to this, prices of items with subdued inflation during the pandemic, such as education and housing, are accelerating as demand continues to recover and the pandemic distortions are fading. Given these elements, it is likely that core inflation will not peak in the near term, a circumstance that at the very least will add persistence to headline inflation through the end of the year. Non-core inflation also accelerated in annual terms during the fortnight as energy and public prices inflation accelerated after months of relative stability. This was caused by the continuous, albeit mild, increases in energy prices since the Ukraine invasion and more aggressive increases in public prices, which were among the most stable since the onset of the pandemic. We think that the contribution of the non-core index will stabilise during the remainder of the year, but this will only allow a slight decline of headline inflation by year-end. Inflation remains pressured due to supply-chain bottlenecks and high commodity prices. On top of this, as demand is still recovering after the Covid-19 downturn, inflation of items closely related with local consumption, such as housing and education, is accelerating. In this context, while we expect inflation will peak in coming months, it will have moderated only slightly by December. After this surprise, and considering the persistence of pressures, it seems inflation will remain above 8% y/y during the rest of the year. Given this and considering that the economic recovery is set to continue albeit at a moderate pace, Banco de México is likely to keep tightening. While in June’s meeting some Board members were already discussing hiking at a slower pace than the Federal Reserve, we believe that recent inflation dynamics have rather increased the probability that Banxico will keep the 75bp pace or at least mirror the Fed’s action in its September meeting. We maintain our view that Banxico will end the tightening cycle this year with a terminal rate between 9.5% and 10.0%. We continue recommending a directional 2-10y steepening strategy. While in the near term the curve will most likely remain flat for longer, the forward slope is already considering a steepening of the curve. A low cost in a context in which Banxico is near the end of the tightening cycle provides scope for maintaining the recommendation. Ociel Hernandez * Market Title * Macro * Americas * Inflation * Core inflation * Macro Outlook * Interest rates * Banxico * Mexico * Commodities * Monthly * Files 2022-08-24 Grupo Herdez.New YE23e TP, reiterate Outperform We are updating our Herdez estimates, and we now project an 8.8% 2021-26e EBITDA CAGR and a 0.7pp EBITDA margin expansion. Having said that, we have set our new YE23e TP at MXN49.50/sh. (MXN50.50/sh. previously for YE22e) and reiterate our Outperform recommendation. We support the positive stance on this name on the back of the defensive nature of the core division (Preserves 86.0% of 2023e EBITDA), the projected operating expansion, including a solid FCF generation (2022-26e annual avg. yield: 14.8%), combined with an over punished valuation; at 6.7x in terms of 2023e adjusted EV/EBITDA, Herdez trades at 22.3% and 9.9% discounts vs. its five-year average and the regional peers’ mean. Pablo Abraham * Market Title * Equity Cash * Americas * Mexico * México Consumer Discretionary * Herdez * Emptyname 2022-08-24 Mexican Flash (CEMEX 2) In the spotlight Cemex: Maintain OP on signs of margin stabilisation We have set a YE23e target price of MXN12.3/CPO (USD5.9/ADR) vs. MXN13.0/CPO (USD6.3/ADR) for YE22e, which reflects the imminent slowdown in economic activity (particularly in the US residential segment) due to higher interest rates, significant input cost inflation, and continuous disruptions in the supply chain. BBVA Market Strategy * Market Title * Equity Cash * Americas * Mexican Flash * Mexico * Daily 2022-08-24 Cemex. Maintain OP on signs of margin stabilisation We have set a YE23e target price of MXN12.3/CPO (USD5.9/ADR) vs. MXN13.0/CPO (USD6.3/ADR) for YE22e, which reflects the imminent slowdown in economic activity (particularly in the US residential segment) due to higher interest rates, the relevant input cost inflation, and continuous disruptions in the supply chain. While headwinds are relevant, we identify encouraging signs of margin stabilisation. We remain constructive on Cemex’s story and reiterate our Outperform rating. Francisco Chavez * Market Title * Equity Cash * Americas * Mexico * México Materials * Materials * Construction * Cemex * Emptyname 2022-08-23 Mexican Flash (INBURSA) In the spotlight Inbursa: A better outlook but valuation remains tight We have set a new YE23e TP at MXN34.50 vs. MXN30.40 for YE22e and reiterate our rating of Underperform. We have updated our model to account for: i) our updated path for interest rates; ii) substantial increases in loan growth geared towards commercial loans (implying lower average loan yields offset by much lower CoR metrics); iii) the adoption of IFRS 9; iv) adjustments to the insurance business; and, v) further improvements to Inbursa’s already best-in-class efficiency. BBVA Market Strategy * Market Title * Equity Cash * Americas * Mexican Flash * Mexico * Daily 2022-08-22 Mexican Stock Screening 22/08/2022 LatAm Equities / A guide to finding value in Mexico BBVA Market Strategy * Market Title * Equity Cash * Americas * Mexico * Mexican Stock Screening * Weekly 2022-08-22 MX – Discussion Topics: Asset Swap Radar SOFR basis move upwards as the local rates implied in MXN forwards are pricing in a more restrictive cycle Last week: our labour market update * Last Wednesday we published our quarterly update on the labour market, where we take a look at the trend during the first half of 2022. Week ahead: 2Q22 GDP and August bi-weekly inflation * 2Q22 GDP: economic growth is still positive. * August bi-weekly inflation data will be released on Wednesday. Market Strategy: bondholders and flows report, TIIE and Asset Swap Radar * Asset Swap Radar: SOFR basis moved upwards as the local rates implied in MXN forwards are pricing in a more restrictive cycle. * Bondholders & Flows July 2022 Report: uncertainty over monetary policy hits foreigners’ positions. * TIIE Radar: markets start to price in a steepened curve. Credit * Pemex (B1/BBB/BB-) will request USD6.62bn to complete additional work at the Dos Bocas refinery. * CFE (Baa1/BBB/BBB-) launched its own telephone and internet service. Edgar Cruz * Market Title * Credit Strategy * Americas * Emptyname * Files 2022-08-22 Inbursa: A better outlook but valuation remains tight We have set a new YE23e TP at MXN34.50 vs. MXN30.40 for YE22e and reiterate our rating of Underperform. We have updated our model to account for: i) our updated path for interest rates; ii) substantial increases in loan growth geared towards commercial loans (implying lower average loan yields offset by much lower CoR metrics); iii) the adoption of IFRS 9; iv) adjustments to the insurance business; and, v) further improvements to Inbursa’s already best-in-class efficiency. Our new estimates are 15.3% higher for 2022-26e at net profit level and we arrive at a more attractive RoNAV of 15.1%, from 13.3% previously, for a target P/NAV of 1.47x after the spin-off of the SINCA (now expected for YE23e, vs. YE22e prior). We arrive at an implied IRR through YE24e of 12.5%, which remains below what we expect for the market and all other financials under coverage, despite assuming a less conservative capital structure and high dividends in 2023-25e. Hence, we decided to retain our Underperform rating on the stock. However, we believe there could be a bull case in which Inbursa could reach escape velocity to achieve a higher RoNAV. In our view, it would take one of the following, or a combination, to materialise: i) increasing growth in retail loans, while keeping CoR at bay in the segment; ii) a much more aggressive capital strategy; or, iii) leveraging through an acquisition (Banamex or loan books from other troubled financial companies). Rodrigo Ortega * Market Title * Equity Cash * Americas * Mexico * México Financials * Grupo Financiero Inbursa * Emptyname 2022-08-19 Mexican Flash (KIMBER, PEÑOLES) In the spotlight Kimber: Slow recovery; still MP Slow recovery. After weaker-than-expected results, we set our YE23e at MXN35.50/share, up from a YE22e TP at MXN34.5/share and retain our Market Perform rating. We still believe that ongoing input-cost pressure will continue to weigh on results and it will take longer for the company to return to its target operating-margin range. Peñoles: Plus ça change… A disappointing performance… Even in the highly supportive price environment witnessed in the past two years, Peñoles managed to disappoint in this period with a highly unstable EBITDA, which fluctuated between USD300mn in the 2Q22 and USD550mn in 2Q21, and that translated into a volatile share price from current bottom of c.MXN170 to a high of MXN390 in January 2021. BBVA Market Strategy * Market Title * Equity Cash * Americas * Mexican Flash * Mexico * Daily 2022-08-19 Penoles: Plus ça change... We set a YE23e TP of MXN211.40/share, and retain our M/P rating on the name Jean Bruny * Market Title * Equity Cash * Americas * Mexico * Mining * México Industrials * Emptyname 2022-08-19 KCM. Slow recovery; still MP (Valuation update YE23e TP). Slow recovery. After weaker-than-expected results, we set our YE23e TP at MXN35.50/share, up from a YE22e TP at MXN34.5/share and retain our Market Perform rating. We still believe that ongoing input-cost pressure will continue to weigh on results and it will take longer for the company to return to its target operating-margin range. Miguel Ulloa * Market Title * Equity Cash * Americas * Mexico * México Consumer Staples * Kimberly Clark de México * Emptyname 2022-08-18 The LatAm- UST Connection. The Fed pivot and other challenges ahead After an aggressive sell-off in global fixed income markets over the past months we are navigating a calmer period triggered by hopes of a quick Fed pivot due to the deceleration in the US economy. EM local rates have rallied as the perception of a “capped” UST has been coupled with local inflation rates reaching a peak (or close to doing so) before starting to converge with the central banks’ target bands. Even though such a sweet combination could lead to some additional reduction in premium across EM local curves, we still see significant risks of US inflation data challenging the narrative of a Fed pivot and triggering additional sell-offs in local curves. Please follow the link for the full report. Mario Castro * Market Title * Sovereign Strategy * Americas * Special Notes * Emptyname 2022-08-18 MX - TIIE Radar: Markets start to price in a steepened curve During last week, the TIIE curve increased by nearly 10bp on average, particularly at the short end and, to a lesser extent, at the belly and rest of the curve. As a result, it flattened and remained inverted from the 2Y tenor onwards. As we have mentioned in our previous reports, the TIIE curve keeps pointing north at the short end as Banco de México will continue to hike its benchmark rate in tandem with the FOMC given that inflation remains under pressure. Indeed, markets are pricing in a terminal rate close to 10.0% in the next nine months. As we pointed out in our note “Banxico: Hoping for the best, preparing for the worst”, dated August 11, 2022, the central bank left the door open to further action, though it mentioned that the pace would depend on current circumstances. While this could mean either increasing or slowing the pace, we believe that Banxico will most likely follow in the footsteps of the FOMC and thus stand pat on our view that Banxico will end the tightening cycle in 2022 with a terminal rate around 9.75%. In terms of carry roll-down, considering a six-month horizon, drip continues to be positive at the very short end of the TIIE curve, especially in the 9M and 1Y tenors (nearly 70bp on average) as markets are factoring in a more aggressive approach from the central bank. As mentioned above, Banxico will most likely continue to tighten monetary conditions, which means that drip in that section is pricing in such action. On the other hand, swap spreads remain at lows as TIIEs outperformed MBonos except in the 9M and 1Y tenors, where a more aggressive approach from Banxico is being priced in. The TIIE curve has flattened and remains inverted. Indeed, spreads all along the curve are at minimums, considering history since 2010. While the flattening has been too fast and aggressive, slopes have remained volatile. The reasons for an inverted curve remain, so we would expect low slopes and an inverted curve in the short term. However, the recent flattening has been so aggressive that markets are no longer pricing in more of it. Indeed, markets are starting to price in a steepening of the curve for the next six months as the neutral carry cost of a steepening strategy is close to 30bp, which means that right now the market is positioned for an increase in the slope. As we mentioned in our note “MX – The room is open to take steepening positions at the 2Y/10Y TIIE slope,” released on 28 July 2022, the case for a directional steepening strategy in the 2Y/10Y had started to make sense. Indeed, at that moment the carry cost was close to zero compared to the 30bp that the curve is pricing in with the latest data. Finally, FRAs are discounting more hikes to come from Banxico and thus remain above spot levels from the 3M to the 1Y section. However, their spreads vs. spot rates have decreased in the latest weeks, especially from the 6M to 1Y tenors. Receiving forward rates and paying spot rates continues to make sense in that section, but room is more limited. In contrast, spread levels for the longer terms (2Y-10Y tenors) continue to decrease and are now in negative territory as the spot rate has moved more aggressively than what the forwards are pricing in. Indeed, in the 1Y/1Y vs. 2Y TIIE and the 3Y/2Y vs. 5Y TIIE, the spreads are at minimums, which enables paying the forward rate and receiving the spot rate. Miguel Iturribarria * Market Title * Global Strategy / Asset Allocation * Americas * Mexico * Banxico * TIIIE * Emptyname * Files 2022-08-18 Extending on the Funotr curve Funotr 30s have performed well following our curve note back in the end of July. However, long end Funotr continues to lag peers and when considered in the context of long duration corporates lagging the sovereign appear attractive at current levels. Jorge Ordoñez * Market Title * Credit Desk Strategy * Americas * REITs * México Real Estate * Interest rates * Fibra UNO Administración * Emptyname 2022-08-18 Mexican Flash (GRUMA, INDUSTRIALS, TRANSPORT) In the spotlight Gruma: More tortilla! New Outperform rating for 2023e We are fine-tuning Gruma´s estimates, we now project a 4.9% 2021-26 EBITDA CAGR and a 14.9% 2026e EBITDA margin (1.0pp below 2021). We have set our new YE23e TP at MXN279.0/share vs. MXN265.0/share previously for YE22e. Having said that, we are upgrading the name to Outperform from Market Perform. We justify the investment thesis’ change on the back of the continuous EBITDA per tonne expansion, the apparent normalisation of grain prices and the company’s proven pricing power, specifically in the core regions. Industrials: Increasing speed bumps but already priced in The last two years have been a real roller-coaster for the automotive sector with, on top of the need to embrace the structural change implied by the EV revolution, a post-pandemic 2020 V-shape recovery nipped in the bud by the logistical challenges driven by semiconductor shortages in 2021, further worsened in 2022 by geopolitical tensions triggered by the Ukraine war. Sector news Transport: Rails W32: USMCA carloads as of 13/08/2022 BBVA Market Strategy * Market Title * Equity Cash * Americas * Mexican Flash * Mexico * Daily 2022-08-17 Gruma. More tortilla! New Outperform rating for 2023e We are fine-tuning Gruma´s estimates, we now project a 4.9% 2021-26 EBITDA CAGR and a 14.9% 2026e EBITDA margin (1.0pp below 2021). We have set our new YE23e TP at MXN279.0/share vs. MXN265.0/share previously for YE22e. Having said that, we are upgrading the name to Outperform from Market Perform. We justify the investment thesis’ change on the back of the continuous EBITDA per tonne expansion, the apparent normalisation of grain prices and the company’s proven pricing power, specifically in the core regions. Pablo Abraham * Market Title * Equity Cash * Americas * Mexico * México Consumer Staples * Gruma * Emptyname 2022-08-17 Industrials: Increasing speed bumps but already priced in (Nemak/Gissa) The last two years have been a real roller-coaster for the automotive sector with, on top of the need to embrace the structural change implied by the EV revolution, a post-pandemic 2020 V-shape recovery nipped in the bud by the logistical challenges driven by semiconductor shortages in 2021, further worsened in 2022 by geopolitical tensions triggered by the Ukraine war. Even though selling prices skyrocketed and order books are full, we fear that volumes lost will never be recovered, with the sector currently facing important headwinds ranging from the ongoing rate hike cycle to higher oil prices. As such, if we maintain our long-term view unchanged (with US sales SAAR to stabilise at 16.0mn units), we are somewhat more cautious in the short-term with a slower recovery pace. Based on this, we set a FY23e TP for Nemak at MXN6.00 (YE22e of MXN7.30), retaining our Outperform rating. For Gissa, we now use a YE23e TP of MXN37.00 (YE22e MXN34.00), with the new upside implied justifying an upgrade from Market Perform to Outperform. Semiconductors normalisation…a little too late? Just as the sector was preparing to ramp up volumes again (2H22e onwards), gradually sorting out the semiconductors shortage, weakening macroeconomic conditions could start to weigh on the consumers’ capacity and willingness to acquire new vehicles. Moreover, despite some OEMs (mainly European) stating that chip deliveries have been better-than-expected lately, other brands continue to face complex bottlenecks that could still limit the overall supply of models. Increasing speed bumps would momentarily delay the recovery. And if that was not enough, new challenges seem to be arising with OEMs and suppliers now facing relevant raw materials costs inflation that, in our view, will be hard to fully pass through, potentially ending up squeezing margins in the short term. In our view, Nemak’s and Gissa’s current valuations seem to be pricing in a worst-case scenario, with both stocks trading at historical lows and at relevant discounts against their international peers. And while our new TPs imply attractive upside potential, we acknowledge that a real re-rating and a more sustainable upward trend of both shares’ prices could take some time to materialise. Montserrat Araujo * Market Title * Equity Cash * Americas * Mexico * Industrials * México Industrials * Autos * Nemak * Grupo Industrial Saltillo * Emptyname 2022-08-17 MX Bondholders & Flows July 2022 Report: Uncertainty over monetary policy hits foreigners’ positions During July, international investors showed outflows of nearly USD2.7bn considering all government securities, as they decreased their positions by nearly USD2.6bn in the MBono market. Considering all government securities, foreigners’ participation fell from 17% to 16% with the latest data. So far this year, these investors have continued to reduce their exposure to MBonos, with their accumulated flows in 2022 showing outflows of nearly USD7.3bn. Considering all government securities, their outflows amount to nearly USD4.9bn, but they have maintained some appetite for Udibonos, with accumulated flows of nearly USD2.4bn in 2022. Meanwhile, all local investors except banks continued to absorb foreign outflows and finance government needs. Other local investors were the most active player, but this was the result of increasing repos with the central bank in the MBono market. On the other hand, local pension funds opened positions in all government securities except Cetes, in which they slightly decreased them. In general, local investor participation stands close to 84% considering all government securities. In tandem with the lack of appetite for government securities, during July foreign investors showed mild flows of nearly USD210mn to MX equities, after two consecutive months of outflows. Their accumulated flows through July were nearly flat, close to USD100mn. During the latest months, volatility has taken center stage, and stock markets are falling fast on mounting concerns that current high inflation and restrictive monetary cycles could hamper corporate earnings. However, during July, the MexBol’s IPC index was mostly unchanged compared to the prior month and thus we didn’t see additional outflows in the latest month. In terms of global portfolio flows, IIF estimates suggest that during July flows to emerging markets’ equity and debt portfolios continued to slow. Accumulated flows are well below those observed in 2021 as the economic recovery has lost steam and the FOMC continues to hike its reference rate, which decreases the appetite for risk assets. Uncertainty regarding the current monetary cycle has mounted as inflation continues to be under pressure, pushing risk premiums upwards. Therefore, the lack of appetite for emerging markets could persist, at least in the short term. Recent uncertainty regarding the monetary policy cycle has triggered additional volatility in the nominal curve as markets are expecting more hikes to come because of persistent inflation. On the other hand, downward risks to economic activity are also being priced in to fixed-income assets, which gives the nominal curve an inverted shape. We have mentioned before that once the market digests the current uncertainty, Mexico and other EMs could receive additional inflows, but the current monetary policy context is limiting them. Miguel Iturribarria * Market Title * Sovereign Strategy * Americas * MBono * Udibono * Flows * Holdings * Monthly * Files 2022-08-17 MX - The jobs market has lost steam In this document, we take a look at the evolution of the labour market during the first half of 2022. Susana Flores * Market Title * Macro * Americas * Emptyname * Files 2022-08-17 GMXT: Rails W32 - USMCA carloads as of 13/08/2022 USMCA rails traffic data for the 32nd week of 2022 (W32, ending 13 August) Jean Bruny * Market Title * Equity Cash * Americas * Mexico * Transportation * México Industrials * GMXT * Weekly 2022-08-17 Mexican Flash (ORBIA 2) In the spotlight Orbia: Doing the right thing is not always enough Doing the right thing… Orbia has benefited from strong catalysts so far in 2022, with all-time high results (annualised 1H22 EBITDA of USD2.44bn, 75% better than its pre-pandemic record). Its Investor Day in May also enabled management to clarify its strategy whilst presenting long-term ‘aggressive’ EBITDA growth targets. The icing on the cake was a c.11% annualised return to shareholders from dividends and a buyback. BBVA Market Strategy * Market Title * Equity Cash * Americas * Mexican Flash * Mexico * Daily 2022-08-17 Orbia: Doing the right thing is not always enough Valuation update with YE23e TP of MXN61.30/share. Jean Bruny * Market Title * Equity Cash * Americas * Mexico * México Industrials * Orbia * Emptyname 2022-08-16 MX - Asset Swap Radar: SOFR basis move upwards as local rates implied in MXN forwards are pricing in a more restrictive cycle SOFR basis are moving upwards on stronger appetite for hedging MXN positions. Implied local rates in the MXN forwards curve are adjusting to the upside even if the MXN continues to outperform its peers because its carry is among the highest in the EM universe, considering current volatility levels. Compared to the flat/inverted shape of the MBono curve, the UMS MXN equivalent curve is steep. UMS asset swaps to MXN fixed equivalent rates and spreads vs. the MBono are above levels seen six months ago. However, spreads vs. short-end MBonos (3Y-5Y) are below those observed six months ago. UMS asset swap spreads against MBonos have increased recently as the SOFR basis adjusted to the upside. Levels are tight at the short end of the curve (3Y-5Y), but continue to be more attractive than local rates in longer tenors. Meanwhile, MBono/UMS spreads are still decreasing as MBonos continue to outperform UMSs. Indeed, spreads from the belly to the long end of the curve are returning to their pre-pandemic levels. In contrast, spreads at the short end of the curve (3Y-5Y) remain at high levels because of monetary policy expectations in the local curve. Meanwhile, UMS/UST spreads have decreased recently, as UMSs are outperforming USTs. Risk premiums are decreasing as risks related to a more restrictive cycle in the US have eased recently. Miguel Iturribarria * Market Title * Global Strategy / Asset Allocation * Americas * Mexico * Asset swaps * Basis Swaps * Emptyname * Files 2022-08-16 Mexican Flash (FCFE, MEGA, FOOD RETAIL, MINING) In the spotlight FCFE: Superior yield: 13% avg. in 2022-23e We have set our YE23e TP at MXN33.90/CBFE (implying 32% potential upside), vs. MXN32.80/CBFE for YE22e, after fine-tuning our estimates for 2022-24e to include better-than-anticipated performance from electricity volumes in 1H22 (+3-4% YoY) and a slow execution of the expense budget for CFE Transmisión YtD (even though it was revised upwards in 2Q22). Mega: Execution risks drive lower RoIC concerns We have adjusted our estimates and rolled over our valuation to YE23e with a TP of MXN56.50/CPO (vs. MXN79.00 for YE22e), and maintain our Market Perform recommendation. We are concerned about the execution risks of the FTTH expansion plan, but valuation multiples remain low and the balance sheet is solid. Food Retail: Recession winds reloaded Valuation update in a recessionary environment. In this note, we set our 2023 YE TPs for Food retailers under coverage considering a scenario with a mild recession hitting the Mexican economy by the 2H23-1H24 We also include scenarios with no recession and a potentially stronger recession. Mining: Normalising Significant downward adjustment… GMexico’s share price is currently down 30% from the historical peak registered in early April (-37% for SCC in the same period), a hard landing mirroring the performance of copper (-25% since April), which is rooted in the set of disappointing 2Q22 results, with a reported EBITDA of USD1.4bn down 42% YoY and implying >30% miss to our and consensus forecasts. BBVA Market Strategy * Market Title * Equity Cash * Americas * Mexican Flash * Mexico * Daily 2022-08-15 MEGACABLE: Execution risks drive lower RoIC concerns We have adjusted our estimates and rolled over our valuation to YE23e with a TP of MXN56.50/CPO (vs. MXN79.00 for YE22e), and maintain our Market Perform recommendation. We are concerned about the execution risks of the FTTH expansion plan, but valuation multiples remain low and the balance sheet is solid. Alejandro Gallostra de Arnedo, CFA * Market Title * Equity Cash * Americas * Mexico * México Communication Services * Megacable * Emptyname Read more 2022-08-18 Extending on the Funotr curve Funotr 30s have performed well following our curve note back in the end of July. However, long end Funotr continues to lag peers and when considered in the context of long duration corporates lagging the sovereign appear attractive at current levels. Jorge Ordoñez * Market Title * Credit Desk Strategy * Americas * REITs * México Real Estate * Interest rates * Fibra UNO Administración * Emptyname 2022-08-22 MX – Discussion Topics: Asset Swap Radar SOFR basis move upwards as the local rates implied in MXN forwards are pricing in a more restrictive cycle Last week: our labour market update * Last Wednesday we published our quarterly update on the labour market, where we take a look at the trend during the first half of 2022. Week ahead: 2Q22 GDP and August bi-weekly inflation * 2Q22 GDP: economic growth is still positive. * August bi-weekly inflation data will be released on Wednesday. Market Strategy: bondholders and flows report, TIIE and Asset Swap Radar * Asset Swap Radar: SOFR basis moved upwards as the local rates implied in MXN forwards are pricing in a more restrictive cycle. * Bondholders & Flows July 2022 Report: uncertainty over monetary policy hits foreigners’ positions. * TIIE Radar: markets start to price in a steepened curve. Credit * Pemex (B1/BBB/BB-) will request USD6.62bn to complete additional work at the Dos Bocas refinery. * CFE (Baa1/BBB/BBB-) launched its own telephone and internet service. Edgar Cruz * Market Title * Credit Strategy * Americas * Emptyname * Files 2022-08-04 CDS Credit Strategy Europe: Leonardo SpA, military spending surge and conservative financial policy accelerate IG re-rating possibility Leonardo is an industrial and technological leader with a strong worldwide presence and conservative financial policy. Its resilient defense activities (83% of FY21 revenues) should increasingly benefit from improving civil trends and the bigger order intake reported YtD. As a result, Moody’s (3 Aug 2022), expects these to support organic deleveraging “over the next 12 to 18 months” – a credit positive. Ana Greco * Market Title * CDS Strategy * Europe * CDS * Industrials * Leonardo Spa * Emptyname 2022-08-29 Innovation: it takes knowledge to make money Throughout human history, innovation, once defined by Peter Drucker as "change that creates a new dimension of performance", has acted as one of the main levers of real progress and source of economic growth and helps us understand the society we live in today. The innovation process involves the acquisition, dissemination and use of new and valuable knowledge. Thus, knowledge is one of the main requisites for innovation. Bringing together innovation and knowledge in the stock market leads us to the interesting concept of the "Knowledge Effect", which is defined as the tendency of highly innovative companies to outperform the market and generate abnormal returns over the long term. Indeed, these companies, known as knowledge leaders, have managed to outperform global stock markets by 70% over the last decade. By analysing the impact of knowledge on markets over the long term, we realise there are two key drivers that allow knowledge-leading companies to beat the market and be rewarded over the long term. These drivers are a strong commitment to properly invest in knowledge production (such as R&D investment) as well as the ability to capitalise on the value of intangible assets (often hidden and undervalued by the market). We believe these innovative and high-quality stocks are an appealing investment in the current very volatile markets – in which after the recent vigorous rally we are trading above our House View 2H22 target levels, hence some corrections seem likely. Their strong commitment to R&D is by itself a clear inflation hedge, enabling them to effectively pass on inflation costs to customers and therefore protect their margins and EPS growth. Moreover, when looking at these knowledge leaders from a valuation perspective we note that they are currently trading at reasonable multiples (12-month forward P/E of 18x, mostly in line with their 10-year historical average and global benchmarks). However, we believe that we can still find good entry points at these levels given the solid EPS growth expectations (+7.5% EPS CAGR 2022-24 consensus estimates) coupled with the opportunity to profit from the benefits of capturing the Knowledge Effect and thus earn steady returns over the medium to long term. Carlos Lopez Ramos * Market Title * Equity * Americas * Europe * House View * Quality * Emptyname 2022-09-01 Mexican Flash (REAL ESTATE, TRANSPORT) In the spotlight Real Estate: Positive trends amidst challenging conditions The sector is likely to continue to face an adverse rate cycle at least until 1H23, in our view. This should continue to represent relevant headwinds for the sector’s valuations in coming months. Sector news Transport: Rails W34: USMCA carloads as of 27/08/2022 BBVA Market Strategy * Market Title * Equity Cash * Americas * Mexican Flash * Mexico * Daily 2022-06-06 ESG Strategy: When ESG investing meets inflation PLAY VIDEO Rising inflation fears combined with geopolitical tensions have weighed on ESG funds and indices' performance so far this year, particularly in Europe (16% MSCI World ESG Leaders vs. 14% MSCI World YtD). In fact, sectors that are commonly excluded from ESG investors' portfolios such as Energy, Defence and Tobacco are significantly outperforming the more ESG-aligned sectors. Moreover, many investors continue to question whether the transition to a more sustainable economy will have significant inflationary consequences of its own. Global economies may face a number of ESG forces affecting future inflation levels (i.e. energy transition long-term supply-demand dynamics). What is true is that adopting inflation protection strategies in the investment decision-making process is key in this market environment, particularly for ESG investing. In this report, we provide a series of investment ideas that ESG investors could take advantage of to protect their portfolios against a higher inflation for longer environment. Alvaro Maldonado * Market Title * ESG * Americas * Europe * Sustainability * Inflation * Energy Transition * Energy * Financials * Integrated Utilities * Pricing power * Emptyname 2022-08-31 BBVA Early Warning Indicator Daily update of BBVA's new methodology to determine changes in short term volatility. Ana Munera * Market Title * Flow Derivatives * Europe * EWI * Daily 2022-09-01 Global FX Daily - Fears about China trigger a spike in risk aversion dragging high-Beta currencies – EURUSD experiences volatility but prolongs the two-week consolidation phase around parity – GBP gets no respite as risks aversion dominates – LatAm FX momentum lost; August returns were mixed – CLP volatility likely to continue Alejandro Cuadrado * Market Title * FX Strategy * Americas * Europe * Daily * Type of file to download * Files 2022-08-29 BBVA Strategy: The reversal of the summer rally…but with growing decoupling of European assets Despite the rapid market rotations and the rally in global risk assets over the summer, if we look at the current asset price relative to those before the summer we see that equity and credit spread levels are midway between our central and bull scenarios of 4,000 and 4,400 respectively, with US 10Y rates almost back to our fair value levels between 3.0-3.5%, after having fallen to the lower end of the ranges at 2.60%. The odds of a Goldilocks outcome for the US economy increased somewhat in August, but market implied expectations of FED rate cuts in 2023 are moderating as inflation is going to be stickier than currently reflected in forward breakevens. In our view, this means, as stressed by Chair Powell in Jackson Hole, that upward pressure on rates will continue in 2023. That said, we remain neutral on US equity markets (see our latest House View report - link) until we have more visibility on the inflation/rates peak. The rapid depreciation of the euro (-19% vs. USD and -9% in NEER terms from early 2021 highs) is, in our view, the clearest indication of to what extent recession probabilities have been revised upward in Europe (both in absolute and relative terms vs. RoW), as gas prices reach new historical highs. Gas futures have risen more than 50% over the past month as fears about Russian supply, combined with adverse weather factors, dominate the market. This upward revision to our gas price forecast is not only having an impact on European growth and inflation over the winter and 2023, as it is also driving renewed outflows from Europe. This combination of factors is driving the fair value level of the euro toward levels below parity vs. USD. Turning to Europe, the euro weakness has contributed to keeping European earnings expectations more resilient, driving some outperformance of the cyclical sectors over the short term. However, this is not enough to chase the cyclical rebound seen in European equities and, in our view, would justify a repositioning towards a more defensive stance. Actionable idea: we are looking for European companies that could benefit from a weak euro in defensive sectors and at attractive valuations. We believe investing in companies with a high sales weighting outside Europe, particularly prioritising more defensive and inflation-related sectors (such as health care) and compelling valuations, given the current volatile market, could be a wise choice to take advantage of the weak euro. Ana Munera * Market Title * Global Strategy / Asset Allocation * Americas * Europe * Cross Asset * Central Banks * Inflation * Interest rates * EUR * USD * Emptyname * Files 2022-01-25 (Buy)back to the future - Returning to the times of shareholders remuneration The Covid-19 pandemic came out as an unexpected accident that has threatened our very existence. But also, it messed with the corporate timeline of buybacks and dividend payoffs. However, now that the economic recovery is reaching the adequate speed, some companies are ready to rock again and they will not chicken out of going back to a preterit distribution policy that also compensates shareholders for the time lost. This situation will appear as a once in a lifetime opportunity for those investors ready to take the wheel, set up the timer and save their present. Jose Luis Samblas * Market Title * Global Structured Solutions * Americas * Europe * House View * Buybacks * Cross Asset * Emptyname * Files 2022-08-26 MX - 2Q22 GDP: The economy remains in expansion mode Mexico’s GDP expanded 0.92% in 2Q22, with the services sector contributing the most (up 0.92% q/q); industrial production and primary activities expanded 0.86% and 0.94%, respectively, compared with the previous quarter. While we still see upside for the economy in 2022, we believe medium-term risks for growth are looming as investment remains low amid tightening monetary conditions and a global slowdown. Susana Flores * Market Title * Macro * Americas * Emptyname * Files 2022-08-31 SPGB Auction Preview - 31 August Tomorrow, the Spanish Tesoro plans to auction EUR4.0bn-EUR5.0bn of its 3Y, 10Y, and 30Y benchmarks together with EUR0.25bn-EUR0.75bn of its 15Y linker. Assuming it issues in the middle of the range, this would take Spain’s YtD issuance to c.76% of its total funding needs for FY22e (EUR148.1bn). Pablo Zaragoza * Market Title * Sovereign Strategy * Europe * SPGB * Auction Preview * Emptyname * Files 2022-08-29 Dashboard Global Stocks Only use BBVA BBVA Market Strategy * Market Title * World Stocks Dashboard * Americas * Europe * Dashboard * Emptyname FEATURED REPORTS * GM House View 2H22: Walking the tightrope between inflation and recession risks * ESGpedia: A cross-asset report of the global ESG market * EUR credit strategy: resistance is futile * LatAm local markets outlook 2022: Finding the gems in a challenging environment * European utilities: threats and opportunities arising from European gas crisis * EUR Credit Outlook 2022: central banks in retreat to drive wider credit spreads * EUR Credit Strategy mid-year outlook: a disorderly transition from rates/liquidity risk to credit/macro risk * European peripheral sovereigns | Presentation: How to cope with the "tightening mode" * FX Watch - Recalibrating the EURUSD * LatAm local curves: Mapping opportunities and trends WEBINARS * BBVA 11th Latin America Conference 2022-05-10 00:00 * Navigating 2022 equities post-pandemic landscape: inflation, raising rates & China’s new dynamics 2021-12-01 16:30 * BBVA GM House View 2022: testing the limits of reflation…lower returns ahead 2021-11-30 16:00 * BBVA Public Sector Webinars: Global Sustainable Investment Views 2021-09-30 10:00 View all events PUBLICATION DOCUMENTS cerrar modal GO Select a lenguage for read de document English Click for read Spanish Click for read BBVA Research * Legal Notice * Terms and Conditions * Security * Cookies Policy * Personal Data Protection Policy * BBVA CIB * BBVA in the world * Contact © Banco Bilbao Vizcaya Argentaria, S.A. 2022 Subir COOKIE SETTINGS We use third party cookies to analyze and measure how our website is used offer better functionality. 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