(Adds background, comments; changes dateline, previous MEXICO
By Gabriel Stargardter
NUEVO VALLARTA, Mexico, June 19 Mexico's stock
exchange said on Thursday it will be connected to bourses in
Chile, Colombia and Peru by year-end through the Latin American
Integrated Market, or MILA, nearly doubling the size of the
MILA was formed in 2011 to boost market liquidity within the
Pacific Alliance trade grouping, and the tie-up aims to create
more business for the financial markets in the region.
"The Pacific Alliance will have in MILA's bourses an
effective instrument of economic integration," said Luis Tellez,
head of Mexico's bourse.
At the end of last year, the combined valued of the four
countries' stock exchanges was $1.1 trillion, Tellez said.
According to the World Federation of Exchanges, Mexico's
stock market is nearly as big as those of the three Andean
MILA works, for example, by allowing a Colombian investor to
buy shares in a Peruvian-listed firm using a broker in Bogota.
Countries maintain regulatory authority over their
respective trading, but the ability to make the cross-border
purchases increases volumes, a key component to attracting
future stock listings by companies inside and outside of the
Experts say MILA should create a "virtuous circle" by
lowering exchange costs, raising analyst coverage and clearing a
path for investment to head to smaller companies.
Traders across the region, however, said that hurdles remain
in order for MILA to live up to its potential.
"I think the project is still in diapers," said Gerardo
Roman, head of stock trading at the Actinver brokerage in Mexico
City, highlighting tax, currency and trading systems as key
issues holding MILA back.
Roman added that MILA's success would also depend on the
liquidity generated by larger institutional investors, such as
Mexico's local pension funds, or "afores," which helped power a
record year of stock offerings there in 2013.
The S&P MILA 40 index, which tracks the top 40
issues from the three Andean exchanges, is up more than 4
percent so far this year, while Mexico's IPC index has
gained just 0.5 percent.
"As a bourse, (MILA) hasn't brought many benefits, in my
opinion," said Daniel Ramos, a trader with Diviso Bolsa in Lima.
"I think with Mexico it will be the same."
The announcement came as a Pacific Alliance summit kicked
off in the western Mexican coastal state of Nayarit, near the
beach resort of Puerto Vallarta.
The Pacific Alliance, created in 2012, is an economic bloc
that includes MILA's members and represents about 35 percent of
Latin America's gross domestic product.
(Reporting by Gabriel Stargardter in Puerto Vallarta, Rosalba
O'Brien in Santiago, Mitra Taj in Lima, Tomas Sarmiento and
Alexandra Alper in Mexico City; editing by G Crosse and Steve