Mexico Pension funds hungry for Santander unit offering
MEXICO CITY |
MEXICO CITY Aug 30 (Reuters) - Mexican pension funds look set to pounce on the impending listing of a quarter of Spanish bank Santander's local unit in a deal that could prompt other banks to follow suit.
The Santander Mexico offering, due in late September and on course to be one of the biggest ever on the Mexican stock exchange, could raise between $3 billion and $4 billion .
"All the pension funds will have interest in participating. There are going to be a lot of people, in Mexico and abroad, interested in the offering," said Luis Eduardo de la Cerda, head of investment at pension fund Sura, Mexico's third biggest which manages some 248 billion pesos ($19 billion) in assets.
Santander, Mexico's third-largest bank by assets, plans to sell 6 percent locally with another 18.7 percent offered abroad.
"It is a very large issue and possibly within a year of its listing, the stock will make it into the IPC index. That is what is generating the appetite," he added.
Mexico's IPC index groups the most liquid stocks in the country, guaranteeing some of the best long-term returns in the equity market.
The Mexican pension fund system managed 1.8 trillion pesos ($137 billion) as of the end of July. On average, these funds can invest up to a third of their portfolios in stocks.
While some concerns linger over the shadow that parent Santander could cast on its Mexican unit given the precarious economic situation in Spain, the stock is rising as an option for portfolios seeking long-term investments in Latin America's second largest economy.
The Mexican economy has weathered the worst of the euro zone crisis posting steady, if modest, annual economic growth of between 3 and 4 percent. And with leader Brazil cooling its pace, Mexico has emerged as the best bet in the region, drawing the attention of investors.
Santander's success upon its listing could encourage other banks to float stakes in the Mexican market. Most of the top banks in the country are now owned by foreign heavyweights.
"We like the banking system. We are very positive on the sector," said Ignacio Saldana, head of investments at the XXI-Banorte pension fund, adding the Santander listing will give a nice boost to the market's liquidity.
So which other candidates could follow in the steps of Santander?
Fund managers say the banking sector is the only potential contender for additional big share offerings in the short to medium term. They cite the Mexican units of Spanish bank BBVA and Citigroup, which operates under the Banamex brand locally, though neither has voiced plans for offerings.
"BBVA would come first," said the head of investment of another pension fund who requested not to be named. "This is the moment for them, they need the money."
Over the past three years, Mexico has seen very few companies, from retailers to small banks, tap the market. Only a handful of them, like the Mexican arm of Spanish builder Obrascon Huarte Lain, were of considerable size.
OHL Mexico, which made its market debut in November of 2010, raised around $910 million, becoming the biggest listing in Mexico in nearly two decades.
The $2.15 billion 1991 listing of tycoon Carlos Slim's fixed line telecoms giant Telmex was Mexico's biggest listing to date.
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