LATIN AMERICAN MARKETS: Mexican Stocks Up After Day-ago Sell-off; Femsa Gets Buy Rating

By Carla Mozee

Stocks in Mexico rose Tuesday, winning back ground lost in the previous session's sell-off as they tracked a rebound on Wall Street.

Mexico's IPC rose 0.4% to 21,677.58. The benchmark dropped 2.9% on Monday.

Mexican stocks found firmer footing as positive comments from U.S. banking executives helped spur purchases of financial stocks, lifting U.S. indexes. The S&P 500 Index (SPX) was up 1.6% and the Dow Jones Industrial Average (DJI) rose 1.2%.

The gains on Wall Street also arrived despite a spate of dreary quarterly reports including one from heavy-equipment provider Caterpillar Inc. (CAT), which expects a global economic contraction of 1.3% this year.

Among Tuesday's advancers in Mexico City were shares of Fomento Economico Mexicano (FMX), or Femsa, up 3.2% after UBS Pactual initiated coverage of the brewer and soft-drinks maker with a buy rating.

"We believe Femsa's current valuation is attractive -- considering strong cash generation at Coca-Cola Femsa, improving beer operations," and room for continued earnings growth at its convenience-store chain OXXO, said analysts Tomás Lajous and Albelardo Hernández in a note to clients Tuesday.

UBS also said it prefers Femsa to Grupo Modelo, as it believes Femsa's retail arm "is under-valued, and much too big to ignore." The broker has a buy rating on brewer Grupo Modelo's shares.

Modelo shares fell 3.6% ahead of the release of its first-quarter results. The shares were also under pressure after Modelo said Monday that it won't issue a dividend payment for 2009.

"Whether the decision was driven by the lawsuit with [business partner Anheuser-Busch InBev] or by the need to save cash in a difficult year, either one sends a negative signal that could weigh on the stock in the near term," said analysts at Deutsche Bank.

Meanwhile, banking stocks were mixed after the Senate cleared a bill that would increase the central bank's authority to regulate fees and interest rates charged by banks to consumers.

Grupo Financiero Banorte shares fell 4.1% and Banco Compartamos fell 2.6%, while Inbursa rose 1.2%.

Shares of steel producer Grupo Simec topped percentage gainers with a rise of 3.9% and shares of Grupo Mexico rose 3.6%. Dow Jones Newswires reported late Monday that Swiss miner Glencore International is interested in buying Grupo Mexico's Asarco unit, which is working its way through bankruptcy court in Texas.

The peso was up 0.2%, gaining ground against the U.S. dollar in the wake of the central bank's auction of up to $4 billion in dollar credits by way of a $30 billion swap line the bank has with the U.S. Federal Reserve.

Chile's IPSA was up 0.6% and Argentina's Merval gained 2%.

Trading in Brazil was closed Tuesday for a holiday.