MEXICO CITY -- The Mexican stock market has hit its all-time high, a sign of confidence in the country and a signal the economy may soon begin a long upswing, analysts say.
The high point was reached Friday, when the market index closed at 4,460.38 points, exceeding the high it attained in February during an aborted rally.
The market had collapsed in the first half of 1982 as wave after wave of bad news rolled over the economy: inflation was out of control, Mexicans had lost confidence in the economy and were sending billions of dollars out of the country and the government was unable to meet payments on the foreign debt, then about $80 billion.
On Aug. 11, 1982, the market index hit bottom at 480.
Although the economy then went into a severe recession that was at its worst in 1983 and still continues with little signs of growth, the market has been climbing steadily since its low point.
'It's curious that it was in that moment (when the specter of the crisis was the worst) that the market began to rise,' said Pedro Alonso, chief economic analyst for the Probursa brokerage house, one of the largest in the country. 'People just believed that things were so bad, they couldn't get any worse.'
He also said people willing to assume risk could not pass up 'incredible' bargains.
'The price-earnings ratio of the market as a whole was just 1.5 in August of 1982,' Alonso said. Most markets average P-E ratios of 10 or above.
He attributed the steady increase in the market to 'a growing climate of confidence. The market can collapse any afternoon in 15 minutes ... but you have to have patience for it to come back.'
He said the steep climb began early this year.
'People looked around and said, 'Look, we survived 1983. Things must be getting better.''
Jose Luis Gutierrez, manager of financial development of the Mexican stock market, agreed that the rise presaged an economic rebound.
He said a range of factors was behind the market high, including news that Mexico's trade balance in the first six months of 1884 had reached $7 billion, confidence in the government's economic problems, the lowering of the prime rate by one U.S. bank, and a sharp drop in Mexico's inflation rate.
Angel Gurria, director general of credit policy at the Treasury Ministry, told UPI the government forsees a growth rate of 1 percent this year (after negative growth the past two years), 3 percent to 4 percent next year, and steady 5 percent to 6 percent growth after that.
Both stock market analysts agreed the economy was ready to expand but Gutierrez cautioned that if it grew as fast as the government predicted, inflation could heat up again.
They did see more healthy gains for the market, though.
'I think it could rise another 2,000 points in the next year,' Alonso said.
'Taking 1978 as a mean, the market is only at 43 percent of its real value, given a strong economy,' Gutierrez said. 'I don't say it will reach 10,000, especially as long as the slump continues, but it will go higher.'
In other news from Mexico
ACAPULCO, Mexico
The resort of Acapulco was hit by a hurricane and continual storms that flooded and closed the airport, drove tourists indoors and left an estimated 21 dead.
Hurricane Odile hit the Pacific coast state of Guerrero south of Mexico City Saturday with winds of 120 mph, overturning a barge on the Atoyac River carrying 18 passengers and three crewmen who drowned, rescue teams said Monday.
Odile dissipated into the mountains of Guerrero dumping torrential rains that provoked flash floods, isolating 44 riverbank and mountain communities with 30,000 residents.
GUADALAJARA, Mexico
Residents and businessmen of Guadalajara, the second largest city in Mexico, deposited some $1 billion in foreign banks during the first three months of this year, a business leader said Wednesday.
Pedro Vargas, president of the Jalisco State Social Union of Mexican Businessmen, said local investors were attracted by the high interest rates paid by U.S. banks.
The government of President Miguel de la Madrid has tried to keep interest rates well over U.S. rates to keep money in Mexico, and has succeeded to a great extent.
