Mexican stocks fell on Thursday but closed out their best year since 2006 as the country began recovering from recession, while the peso posted only modest gains, hit in part this year by a debt downgrade.
The IPC stock index advanced 43.5 percent this year as shares bounced back from last year's credit crisis amid growing confidence in the economic recovery in the United States, Mexico's top trading partner.
But the Mexican peso lagged the sharp gains in other emerging market currencies, weighed down by concerns surrounding the country's debt outlook as state-run oil production declines. The peso gained around 5 percent this year compared with a 35 percent jump in Brazil's real.
The IPC stock index slipped 1.01 percent on Thursday to 32,120, pulling back from a more than 2-year high hit this week but leaving it close to its all-time high of 32,851.14.
Traders noted stocks were hit by a wave of profit-taking after this year's strong gains. Hurting sentiment, a reading on US Midwest business growth was revised downward. The peso firmed 0.14 percent to 13.06 after US data showed the number of new claims for jobless benefits fell last week, boding well for a recovery in Mexico's battered exports. A series of strong US employment and consumer data have boosted hopes for a robust recovery and helped the dollar on bets that the Federal Reserve may have to raise interest rates sooner than expected in 2010. That has curbed the attraction of riskier emerging market currencies.
Mexico's peso has given up more than 3 percent this month after hitting a 13-month high in the wake of a widely expected ratings downgrade by Fitch Ratings in November. Standard & Poor's followed with its own downgrade in December, but both agencies placed Mexico's credit outlook as "stable," easing fears of further downgrades any time soon. The yield on the government's benchmark 10-year peso bond rose 2 basis points to 8.00 percent. Mexico's central bank is widely expected to raise interest rates during the first half of next year as new taxes spur inflation.
The peso is seen making further gains in the coming months on signs Mexico is climbing out of its deepest recession since the 1930s after shrinking around 7 percent this year. In stock trading, top retailer Wal-Mart de Mexico slid 2.33 percent to 58.70 pesos, coming off an all-time high hit Wednesday. Walmex surged 60 percent this year as it used bargain prices to expand its market share and snapped up Wal-Mart Stores Inc operations in Central America.
Brewer and bottler FEMSA rose 0.13 percent to 62.76. FEMSA shares have gained more than 50 percent this year, surging in October after the firm said it may sell its beer business.