Mexican stocks rally

Mexican stocks rallied on Friday, buoyed by a jump in Aeromexico airline on take-over interest. The IPC index, recently trading near record highs, climbed 1.19 percent to end at 30,700.01 points.
Investors have bid Mexican shares increasingly higher in recent months in part because of expectations President Felipe Calderon has a good chance of passing a key fiscal reform to boost government revenues.
Shares of Aeromexico, Mexico's No 1 but struggling airline, soared 12.2 percent after the owner of a fledgling Mexican discount airline said it wants to buy the carrier. The stock of Consorcio Aeromexico, the holding company of Aeromexico, jumped 25 centavos to end at 2.30 pesos in unusually high volume of 12 million shares traded.
The controlling shareholder of discount airline Avolar said he and a group of investors plan to make a formal offer for the assets of Consorcio Aeromexico within weeks, Reforma newspaper reported on Friday. America Movil, the most heavily weighted stock in the IPC index, added 2.35 percent to end at 31.86 pesos. Its New York-traded stock rose 2.75 percent to $51.90.
On the losing end, fixed-line telephone operator Telmex slipped 1.25 percent to 22.19 pesos. The peso firmed 0.50 percent to 10.7910 per dollar after the central bank kept its key overnight interest rate at 7.25 percent but warned it would tighten monetary policy if its inflation goal is in peril.
Last month the bank surprised markets with a 25 basis point increase in interest rates. Rate hikes can draw money into a country's bonds and currencies by making debt yields more attractive.
The decision to hold rates steady, accompanied by statements the central bank is serious about keeping inflation down, improves Mexico's economic outlook over the long term, said David Watt, a senior currency strategist at RBC Capital Markets in Toronto. "It has an effect on confidence of foreign investors. so this is actually a positive turn for the peso," he said. In debt trading, the yield on Mexico's closely watched 10-year peso bond fell 7 basis points to 7.69 percent.