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Investing.com -- Barclays (LON:BARC) holds a bullish view on Mexican equities despite ongoing trade uncertainties, highlighting an average 25% upside potential in the stocks under its coverage.
The investment bank notes that while immediate risks from tariffs have been avoided, "the risk won’t lift until the United States–Mexico–Canada Agreement (USMCA) is revised."
Mexican stocks continue to trade at a discount, with the companies in Barclays’ coverage trading at "an average of 6.1x and 5.5x 2025e and 2026e EV/EBITDA, respectively,” representing a 13% discount to the historical average for 2025.
Still, market sentiment remains cautious as investors weigh potential trade disruptions.
Last week, Mexican President Claudia Sheinbaum managed to avoid a tariff hit. Barclays strategists point out that Sheinbaum’s "cool head" approach helped avert a 25% tariff on Mexican exports to the US, a move that could have weighed on the country’s economic growth prospects.
However, strategists warn that "in a few weeks the negotiation drama will continue," keeping uncertainty high.
In terms of market impact, Barclays sees opportunities emerging from these challenges.
“Crises create opportunities," strategists led by Pablo Monsivais said, and this could be an opportune moment for Mexico to push forward with its economic agenda.
Sheinbaum’s "Plan Mexico," a $227 billion investment initiative, aims to boost Mexico’s global economic standing, increase investment to GDP, and create jobs in specialized manufacturing. The plan also includes tax incentives, infrastructure spending, and a focus on high-tech industries like semiconductors.
Despite near-term concerns, Barclays believes that a negative outlook is already priced in, reinforcing its view that select Mexican equities present compelling investment opportunities.
“A top-down view might prevent a re-rating in the near term until tariff risks diminish, but we think that with a bottom-up approach there are a few good investment opportunities,” strategists continued.
They favor "low beta names with USD revenues, and reasonable leverage, among non-cyclical sectors such as food and beverage, among others." Nearshoring plays remain attractive but may require more time to re-rate given the uncertain trade environment.