What is the IPC Mexico Index?
The IPC Index is the benchmark index for the stock market in Mexico. It is also one of the most important emerging market stock indexes.
This article describes the index, its history and the way it is calculated. Also discussed are the largest companies in the index, the factors that affect its performance, and how you can invest in the index or trade it.
S&P Dow Jones Indices
The IPC index is now managed and published by S&P Dow Jones Indices. S&PDJ is a joint venture between S&P Global, the CME Group and News Corp.
Mexican Stock Exchange (Mex Bolsa)
The Bolsa Mexicana de Valores (BMV), or Mexican Bolsa is the primary stock exchange in Mexico. The exchange was founded in 1933 since when it has merged with several smaller exchanges. It became a fully electronic exchange in 1999. The exchange itself is listed, and forms part of the IPC index.
The IPC explained
The IPC index is a benchmark index for the Mexican stock market. The index includes 35 blue chip stocks listed on the Bolsa Mexicana de Valores. It is viewed as a gauge for the economy of Mexico and for investor sentiment in the country. The IPC is also one of the oldest stock indexes around.
The index name, IPC, is an abbreviation for Índice de Precios y Cotizaciones. The full name is S&P/BMV IPC index to reflect the joint management of the index by S&P and BMV.
The index is also known as the MX35, the MEXBOL and the Mex Bolsa index.
The IPC index was launched in 1978 with 42 stocks and was initially managed by the exchange. In 2000 the number of index members was reduced to 35 and the index methodology was standardized.
A special division of the BMV was established in 2005 to manage the exchanges indexes. In 2012 the methodology was updated so that restricted shares were excluded from the calculation. S&P Dow Jones Indices took over the management of the index in 2017. The index is now jointly managed by BMV and S&P Dow Jones.
Understanding the IPC
The IPC is a modified market cap weighted index. For stocks to be included, they must be listed on the BMV and must have an investible weight factor of 0.1. This means at least 10% of the company’s outstanding shares must be available for investment.
To be included in the index, stocks must also comply with other requirements related to liquidity and size.
How is the IPC index calculated?
When calculating the index, only the free float market capitalization of each company is considered. This means restricted shares held by related parties are excluded when the value of a company is calculated.
Furthermore, the weight of each stock is capped at 25% of the index. If the weighting of any stock exceeds 25% it will be recalculated during the quarterly review.
Largest 5 IPC companies
The following are the 5 largest companies in the IPC index which together account for 56% of the index. These are the most important stocks for investors trading the IPC index to track.
America Movil is the largest component of the IPC index with a weighting of around 15%. The company, which is worth $39 billion, provides telecommunication services throughout Latin America, as well as the US, the Caribbean and Europe.
Walmart de Mexico is a partially owned subsidiary of Walmart, and accounts for 13% of the index. It is the largest division of Walmart outside of the US and operates over 2,500 stores throughout Mexico.
Fomento Económico Mexicano, known as Femsa, is a beverage and retail company. The company produces and markets Coca Cola products in Latin America, and also operates retail chain stores. The company is worth $27 billion and accounts for 13% of the IPC index.
Grupo Mexico is a conglomerate involved in mining, transportation and infrastructure. The mining division is primarily involved in copper production, as well as silver, gold and zinc. The transport division provides freight and passenger rail services. The infrastructure division serves the energy industry. Grupo Mexico has a market value of $16 billion and has a weighting of 7.4% in the index.
GPO Finance Banorte is the largest financial services group in Mexico. The group owns the Banorte and Ixe commercial banks and is also involved in insurance, pensions and broking.
Banorte has a market value of $7 billion and an index weight of 7%.
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