Radiant springtime hits Bolsa: market enjoys slew of positive indicators, hints at breakthrough effort. (Market Moves).

Mexican markets were very busy in April and May, with quarterly reports, annual meetings, dividends and a strong move by the government regarding monetary policy. All this, and still a lot of financial players managed to take almost two weeks off during the period thanks to an accumulation of Easter week and a five-day puente (bridge) at the beginning of May.

Traders' reaction to the odd Friday between Labor Day on Thursday, May 1 and the weekend illustrated the bullish expectations in the market. Instead of taking advantage of the holiday, seemingly all the Bolsa's traders were glued to their screens.

We were looking for the Dow to surpass 8,521 points, which would represent successively higher peaks and troughs, a sure sign of a bull market. At the same time, a number of Mexican blue chips were looking to break through their 52-week highs.

HEAVY VOLUME, GOOD BUSINESS

As the local markets tested these important resistance levels, the confidence in Mexico was confirmed by a marked rise in daily volumes. Benchmark stock Telmex, which had been seeing volumes of between 5 and 8 million daily last month, has consistently topped the 10 million mark in recent weeks, although its performance has not been on pace with other blue chips.

For example, strong earnings reports have helped America M6vil, the No. 1 wireless firm, add almost 20% in dollar terms (from April 9 to May 9), while cement giant Cemex has gone up 14.3% and banking group Bancomer 14.7%.

Looking broadly, there have also been strong surges in the retail sector (with the exception of benchmark WalMart de Mexico). The first quarter was a healthy one for second-line retailers, and they were rewarded with some impressive runs--No. 2 retailer Commercial Mexicana added 37% in dollar terms. Specialist retailers Elektra and Sanborns also posted strong gains.

Meanwhile, the construction sector continues to sizzle--Corporacion Geo was up 29%, Empresas ICA rose 36% and homebuilder Hogar jumped 49%, leading the market in percentage gain.

Additionally, the diffusion of quarterly earnings reports at the end of April cast a rosy light on a number of these company stocks. Another important occurrence in May was the Central Bank's grabbing of the monetary policy reins--a move which has been lauded here and abroad as responsible and timely.

POSITIVE MACRO INDICATORS

As it has become more evident that a strong dollar may be making way for a strong Euro, the Banco de Mexico announced it would do something with its mountain of foreign cash reserves, currently around US$53 billion, and that starting May 2 it would auction off its excess dollars on a daily basis. It also said its monetary short--the corto, which is employed primarily to anchor inflation--would be used to take money out of circulation on a daily rather than monthly basis. The result? The peso strengthened from almost 10.80 against the dollar to a new range of 10.10 to 10.20, while April inflation managed to come in at its lowest level for the month since 1970.

In addition to the financial news, it has to be noted that the dark cloud of SARS spreading over the Far East has shown its silver lining over this side of the globe.

As investors continue to be hit with more downwardly revised data from the region, they are taking another look at LatAm markets, which have emerged as an increasingly safe option as they quietly creep back up. While Mexico's benchmark IPC index was up 4.4% on the month, both Argentina's Merval and Brazil's Bovespa index were up around 10% over the same April 9-May 9 period.

After such a strong couple of months, only one question now remains--how much steam is left in this rally? Answers forthcoming.

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Index                            30 Apr. 2003         NOMINAL
                                                 Monthly  Accrued

Stock Market                            INDEX

IPC                                  6,509.88      10.1%     6.3%
INMEX                                  360.56      11.6%     8.0%

Mutual Funds

Equity                               2,134.86       6.7%     5.1%
Debt for Individuals                 4,010.80       0.7%     2.5%
Debt for Corporations                1,570.42       0.7%     2.6%

Economic Activity

Industrial                           2,618.59       8.9%     3.8%
Retail                               9,408.71       6.8%     2.4%
Non-Financial Services               5,376.42      -2.0%    -8.0%
Insurance and Banks                  3,573.13       0.8%     6.0%
Broker Firms                           414.03       0.0%     0.0%
Financial Groups                       276.09       6.8%     6.7%

Sector

Mining                               4,193.02       7.6%     7.0%
Industrials                          2,427.95       6.3%    -2.5%
Construction                        11,063.66      19.1%     7.8%
Retail                              12,987.97       9.2%    15.1%
Communications & Transportation     25,404.49       6.7%     3.1%
Services                               917.38       7.5%     9.7%
Holding Companies                    2,246.22       9.5%     2.8%

Index                                   REAL(1)         DOLLARS(2)
                                   Monthly  Accrued     Monthly

Stock Market

IPC                                   9.9%     4.7%       13.6%
INMEX                                11.4%     6.4%       15.2%

Mutual Funds

Equity                                6.5%     3.5%       10.2%
Debt for Individuals                  0.5%     1.0%        3.9%
Debt for Corporations                 0.5%     1.1%        4.0%

Economic Activity

Industrial                            8.7%     2.3%       12.4%
Retail                                6.6%     0.9%       10.2%
Non-Financial Services               -2.1%    -9.3%        1.2%
Insurance and Banks                  -0.9%     4.5%        2.4%
Broker Firms                         -0.2%    -1.5%        3.2%
Financial Groups                      6.6%     5.1%       10.2%

Sector

Mining                                7.4%     5.4%       11.1%
Industrials                           6.1%    -3.9%        9.7%
Construction                         18.9%     6.2%       22.9%
Retail                                9.0%    13.4%       12.8%
Communications & Transportation       6.5%     1.5%       10.2%
Services                              7.3%     8.1%       10.9%
Holding Companies                     9.3%     1.3%       13.0%

Index                            DOLLARS(2)
                                 Accrued

Stock Market

IPC                                 5.1%
INMEX                               6.8%

Mutual Funds

Equity                              3.9%
Debt for Individuals                1.4%
Debt for Corporations               1.4%

Economic Activity

Industrial                          2.7%
Retail                              1.3%
Non-Financial Services             -9.0%
Insurance and Banks                 4.8%
Broker Firms                       -1.1%
Financial Groups                    5.5%

Sector

Mining                              5.8%
Industrials                        -3.6%
Construction                        6.6%
Retail                             13.8%
Communications & Transportation     1.9%
Services                            8.4%
Holding Companies                   1.6%

(1) April inflation: 0.17%

January-April inflation: 1.49%

(2) April depreciation: -4.6%

January-April depreciation: -1.18%

Gianluca Baratti works as a stock market analyst at Finamex Casa de Bolsa.