Citigroup (NYSE: C) upgraded Mexico’s stocks to a “neutral” rating and downgraded Peru to an “underweight” rating, down from a neutral rating on Tuesday in a newly released research report.
In the report, Citigroup said that “Peru is among the two most expensive emerging markets globally.”
Meanwhile, Mexico is perceived to be a major beneficiary if the US dollar and the economy recovers faster than expected, which Citigroup is now a strong possibility.
Citigroup upgraded Mexico’s rating and lifted its weight in telecoms and consumer staples from overweight to neutral. The bank added America Movil to its focus list in Mexico, which also includes Femsa, Televisa, Alfa, Mexichem and Compartamos.
Brazil remains Citigroup’s top pick in Latina America. Citigroup recently raised its predictions for Brazil’s gross domestic product to 5.9% in 2010.
Citigroup said in the statement, “In our view, the time to buy equities in Mexico over Brazil is not now, but when the dollar starts an extended rebound.”
Mexico’s equities market still faces some significant headwinds. Mexico could soon be downgraded by Standard and Poor’s after Fitch Ratings downgraded the country in Mexico. This could be detrimental to the general outlook on the country because investors may no longer be pricing in that possibility.
Their analyst said, “In the new post-Fitch optimistic world, any new downgrade represents a risk to the equity market.” Another potential risk that the country has is a new tighter fiscal policy which could undercut its weakened economy.
