Mexico Equity & Income Fund Inc · NYSE:MXE
Mexico Equity & Income Fund — Investor Presentation (August 2023)
37 slides from Mexico Equity & Income Fund's investor presentation, Aug 31, 2023
Slide 1: Mexico's Economic Review ended August 31, 2023
Mexico’s Economic Review ended August 31, 2023 1
Slide 2: Index
Mexico’s Economic Review ended August 31, 2023 Index I. Economic Activity……………………………………………….…..... 2-16 II. Exchange Rate & External Accounts ...……..………..……………. 17-22 III. Monetary Policy & Sovereign Risk ...................…………………... 23-26 IV. Commodities …………………………………..……………….…..... 27-34 2
Slide 3: Gross Domestic Product (GDP)
I. Gross Domestic Product (GDP) Economic activity has remained resilient in the first half of 2023, showing better-than-expected economic growth of 3.7% in 1Q’23 and 3.6% in 2Q’23. Mexico's Gross Domestic Product (Year over year %) 19.4% 20.0% 15.0% 10.0% 5.0% 2.9% 3.6% 2.1% 2.2% 0.0% -0.2% -5.0% -1
Slide 4: GDP by Component
I. Gross Domestic Product (GDP) Since the beginning of the year, GDP growth has continued to be led mainly by tertiary activities Quarterly GDP by Component Year over Year Growth Tertiary Activities 4.2% GDP 3.6% Primary Activities 2.9% Secondary Activities 2.4% 25.0% Cientos 20.0% 15.0% 10.0% 4.2 5
Slide 5: Industrial Production
I. Industrial Production Industrial activity maintained its growth trend in July… Índice Monthly Industrial Activity Index (IMAI) % Year over Year 4.9% Industrial Activity 105.0 110 50% 105 40% 105.0 100 30% 95 20% 90 4.9% 10% 85 0% 80 -10% 75 -20% 70 -30% Source: INEGI Experience Consistency Vision
Slide 6: Secondary Component
I. Secondary Component …driven again by the expansion in construction. Index Mining Index Utilities 138.0 Year over Year -0.5% Mining 101.4 15.0% 110.0 Year over Year 4.6% Utilities 78.6 20.0% 128.0 10.0% 10.0% 100.0 118.0 5.0% 0.0% 108.0 0.0% 90.0 -10.0% 98.0 -5.0% 80.0 -20.0% 88.0 -10.0% 70.0 -30.
Slide 7: PMI Markit
I. PMI Markit Non-manufacturing activity was still resilient in August, and manufacturing activity was relatively stable above expansion levels. Source: IHS Markit, Bloomberg Experience Consistency Vision 7
Slide 8: Gross Fixed Investment
I. Gross Fixed Investment Gross Fixed Investment registered 12 consecutive monthly advances in June and an 18.8% growth for the first half of 2023. Gross Fixed Investment (As of June 2023, published on Sept 4 2023) Index (%) Gross Fixed Investment 28.64% Gross Fixed Investment 116.8 130 50% 120 40%
Slide 9: Gross Fixed Investment
I. Gross Fixed Investment Investment in machinery & equipment and investment in construction support the performance of the Gross Fixed Investment index. Index Machinery (%) 120.0 Machinery 20.07% Machinery 115 50.0% 40.0% 110.0 30.0% 100.0 20.0% 10.0% 90.0 0.0% 80.0 -10.0% -20.0% 70.0 -30.0% 60.0 -
Slide 10: Foreign Direct Investment
I. Foreign Direct Investment During the first half of 2023, Foreign Direct Investment (FDI) was $29.0 billion, 41% higher than the first half of 2022. Source: Ministry of Economy. Experience Consistency Vision 10
Slide 11: Employment
I. Employment Jobs year to date were 624k, a 1.2% increase compared to the same period in 2022. On average, 78,000 new jobs have been created monthly during this year. Formal Job Creation Figures as of August 31, 2023 Year over Year 3.6% Thousands of workers 21,960 5.0% 22,000 4.0% 21,500 21,000 3.0
Slide 12: National Retailers Association ANTAD
I. National Retailers Association ”ANTAD” Same-store sales grew 6.3% in July, slightly lower than the strong performance in June 2023. ANTAD (Same Store Sales) Year over year, as of July 31 2023 47% ANTAD as of July 2023 6.3% 42% Average 2023 Antad 6.3% Average 2022 Antad 10.9% 37% Average 2021 Anta
Slide 13: Remittances
II. Remittances Structural Economic Strength Inflow is growing at a 4-Year Annual Compound rate of 14%. Remittances registered a monthly average of 5.1 billion US Dollars for the past seven months. Monthly Remittances Accumulated Remittances USD YoY USD Million Year over Year % Billion Figures as of
Slide 14: Tourism Income
II. Tourism Income The flow of international tourism exceeded US $16 billion for the first seven months of 2023, an increase of 8.9% vs. the same period in 2022 and 22% higher than 2019. USD Million Tourism Income (As of July 2023) 30,000 25,000 16,970 20,000 Average 15,270 15,000 10,000 5,000 Sourc
Slide 15: International Reserves
II. International Reserves International Reserves reached its second-highest record since September 3rd, 2021. Rating agencies see the International Reserves level as a financial strength factor. Million Dollars International Reserves (Short term, as of July 21, 2023) 210,000 Accumulated 2023 : Accu
Slide 16: Investment in Equity Markets
II. Investment in Equity Markets Afores resources under management increased 11.6% in June 2023 compared to June 2022. Mexican equity investments represent 6.6% vs. 6.5 % in the same month in 2022. Million MXN Pesos Afore Total AUM & Percentage Investments in Mexican Equities 6,000,000 Net Assets %
Slide 17: Exchange Rate and External Accounts
II. Exchange Rate and External Accounts MXN Spot Exchange Rate per USD 25.50 Short term as of August 31, 2023 25.36 36.8% 24.50 23.50 22.50 26.5% 10.6% Highest price point of 2018 21.50 Average of 2022: 20.11 20.88 36.8% -15.2% 20.50 20.25 19.50 19.40 -12.9% -8.6% 18.70 18.50 19.22 Average '23: Aver
Slide 18: Trade Balance
II. Trade Balance Total exports have increased 1.1% year over year in June. Oil exports decreased -by 28.8%, while non-oil exports increased by 3.7%, mainly driven by the manufacturing segment, which accounts for 89% of total exports. M exico´s Trade Balance (As of June 2023) Exports Jun-23 % of Tot
Slide 19: Trade Balance
II. Trade Balance In the first seven months of 2023, the trade balance presented a 7,225 million dollars deficit. In the same period of 2022, the deficit was 19,037 million dollars. Mexico's Trade Balance 60,000 8,000 55,000 6,000 50,000 4,000 45,000 2,000 40,000 0 35,000 -2,000 30,000 -4,000 25,000
Slide 20: Mexico's Trade Balance
II. Mexico’s Trade Balance Data from July 2023 shows that total exports to the US continue to increase, reaching new historic levels. The increase year over year was 8.0% vs. July 2022, and a 29% increase compared to the same month in 2019. Million USD Total Exports & Imports Acumulated Last 12 Mont
Slide 21: International Trade (U.S.)
II. International Trade (U.S.) Mexico became the leading trade partner to the USA in March 2023 and has since alternated with Canada in the top two positions. United States International Trade (YTD as of July 2023) Country Exports Imports Total Trade Balance Country Exports Imports Total Trade Balan
Slide 22: International Trade (U.S.)
II. International Trade (U.S.) Mexico and Canada have been gaining US import market share since 2020. Annual U.S. Imports by Country Million USD 600000 $536,754 500000 $454,930 400000 $437,729 300000 200000 100000 0 Canada Mexico China Source: U.S. Bureau of Economic Analysis Experience Consistency
Slide 23: Mexico Consumer Price Index (CPI)
III. Mexico Consumer Price Index (CPI) Inflation continued its downtrend in August 2023, +4.6% vs. +4.8% in July 2023. Inflation Year over Year, as of August 2023 10.00% Headline 4.64% 9.00% Core 6.08% 8.00% Central Bank's Target 3.00% 7.00% Producer Inflation minus oil & services 0.90% 6.08% 6.00%
Slide 24: Mexico Consumer Price Index (CPI)
III. Mexico Consumer Price Index (CPI) The core component slipped for the seventh consecutive month in August (+6.1% vs. +6.6% in July). In contrast, Non-Core inflation climbed by 1.4% MoM. Core Inflation (YoY % Change) 12.00% 11.00% Goods 6.86% Services 5.15% 10.00% 9.00% 8.00% 6.86% 7.00% 6.00% 5.
Slide 25: Monetary Policy & Sovereign Risk
III. Monetary Policy & Sovereign Risk A possible peak in reference rate at 11.25% - Banxico left the reference rate unchanged on August 10th, with the possibility of maintaining this level for an extended period. Banxico vs. Federal Reserve Reference Rate 12.00 Figures as of September 5, 2023 11.25
Slide 26: Public Finance & Sovereign Risk Premium
III. Public Finance & Sovereign Risk Premium Healthy Public Finances lead to adequate spreads compared to U.S. debt Primary Balance % of GDP M Bond vs. T-Note (10 year) 1.50 As of September 5, , 2023 1.1 710 1.00 0.6 680 0.4 650 0.50 0.1 620 0.00 590 560 -0.50 -0.3 -0.2 -0.4 -0.5 530 -0.6 -0.6 -1.00
Slide 27: Commodities: Brent and WTI Oil
IV. Commodities Oil prices rose due to supply shortage forecasts by the International Energy Agency (IEA). Extensions in production cuts by Saudi Arabia and Russia supported the increase in oil prices. Brent Crude Oil (USD/bbl) Brent Crude Oil (USD/bbl) $90.58 Average $62.69 YoY 1.6% 3M Moving Avera
Slide 28: Commodities: Jet Fuel and Pet Coke
IV. Commodities Pet Coke has experienced pressure in 2023, impacted by China’s reopening. Jet Fuel (USD/gallon) Jet Fuel (USD/gallon) $2.8434 Average $1.81 YoY -15.35% 3M Moving Average YoY -39.8% $5.00 300% $4.50 260% $4.00 220% $3.50 180% $3.00 140% $2.50 100% $2.00 60% $1.50 20% $1.00 -20% $0.50
Slide 29: Commodities: Natural Gas
IV. Commodities Natural gas prices in the US reaching lower levels registered in 2021. Pressures have eased In Europe; Natural Gas is below its historical average of $34.46. Natural Gas (USD/Mmbtu) Natural Gas (USD/MMBtu) $2.612 Average $3.16 $10.0 YoY -51.76% 3M Moving Average YoY -47.06% 140% $9.5
Slide 30: Commodities: Gold and Silver
IV. Commodities Gold continues its upward trend, reaching levels seen in 2020, concerns regarding the financial sector and global economic uncertainties, and increased demand from China CB & Households. Silver is continuing the upward trend that began last September. Gold (USD/oz) Gold (USD/Oz) $191
Slide 31: Commodities: Copper and Zinc
IV. Commodities China’s commodities imports surged last month, ahead of a seasonal pickup in economic activity and as government stimulus begins to filter through into raw materials markets. Copper ore shipments soared to all-time highs. Prices in copper remain elevated; meanwhile, zinc remains belo
Slide 32: Commodities: Aluminum and Steel
IV. Commodities Aluminum prices have declined due to increased production in China and lower demand. Steel prices have declined since April 2023 because of China’s slow recovery. Aluminum (USD/MT) Aluminum (USD/MT) $2172.5 Average $2003.59 $4,000 YoY -12.25% 3M Moving Average YoY -22.35% 100% $3,700
Slide 33: Commodities: PVC and Polyester
IV. Commodities PVC lower prices due to a discount offered by the most significant US PVC producer in March; there is an increase in offer and lower demand. Polyester lower prices are related to the decline in demand. PVC (USD/MT) 2,100.00 PVC (USD/MT) $1064.84 Average $1130.65 1,850.00 1,600.00 1,3
Slide 34: Commodities: Corn and Wheat
IV. Commodities Corn and wheat have lowered towards their historic average despite Russia retreating from the Black Sea grain agreement with Ukraine, and the critical Ukrainian ports on the Danube have continued working despite another Russian strike overnight on infrastructure and grain storage fac
Slide 35: Definitions
Definitions Primary Activities: These are deeply connected to the earth’s natural resources and occurs where people stay close or are in touch with any of the earth’s natural resources such as land or water. E.g., Agriculture, fishing, mining, etc. Secondary Activities: All activities involved in th
Slide 36: Disclaimer
Disclaimer The Mexico Equity and Income Fund, Inc. ("the Fund") maintains a long-term capital appreciation investment objective through investments in securities, primarily equity, listed on the Mexican Stock Exchange. The Fund provides a vehicle to investors who wish to invest in Mexican companies
Slide 37: Contacts
Contacts Pichardo Asset Management, SA de CV Independent Advisors www.paminversion.com.mx Central Office Andres Bello 45, Piso 22, Polanco, 11560 CDMX, México Teléfono: + 52 (55) 5261 4600 /04/21/16 Contingency Office Lomas Verdes 68, Cuernavaca 62158, Morelos, Mexico Tel. 52 777 2021367 / 2021366 /
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