MEXICO CITY -(Dow Jones)- UBS Investment Research said Thursday it upgraded Mexican stocks in its model Latin America portfolio, while removing Peru.
In a research note, UBS said it added to Mexico, taking the country to a small overweight from underweight, citing "strong economic data, interest rates cuts, and revival in the fortunes of the pro-market PAN (National Action Party) presidential candidate Felipe Calderon."
On Wednesday, Mexican stocks rose to a sixth straight record-high close, as investors have been pouring money into equities, encouraged by first-quarter earnings, better-than-expected economic data for the first quarter and by the central bank's interest rate-cutting.
The Bank of Mexico said Wednesday that it expected gross domestic product to show year-on-year growth of 5.2% in the first quarter, and to grow between 3.5% and 4% for the full year, up from its previous estimate of 3.2% to 3.7%.
UBS said Brazil remains its top pick in the region, although "on a sector- adjusted basis, we see more value in many Mexican versus Brazilian names, such as homebuilders, retailers, and banks."
On the political front, recent opinion polls have shown Mexican presidential candidate Calderon gaining on the leader Andres Manuel Lopez Obrador of the left-wing Democratic Revolution Party. A couple of surveys showed Calderon leading in April.
"Calderon is campaigning on a pro-investment, pro-stability platform which is naturally more market-friendly than Lopez Obrador's more interventionist approach," UBS said.
The investment bank raised its 12-month target for the Mexican market's IPC index to 22,345 points. The IPC closed Wednesday at 20,567.
To finance the increase in Mexico, UBS said it cut Peru from its model portfolio, citing concerns about the South American country's upcoming run-off presidential election between leftist Alan Garcia and nationalist Ollanta Humala.
"A Humala presidency likely carries significantly greater policy risks than a Garcia presidency," UBS added.
Specifically, UBS said it added engineering and construction concern Empresas ICA (NYSE:ICA) (ICA) and homebuilder Urbi Desarrollos Urbanos SA (URBI.MX) in Mexico, while removing Peru's Credicorp Ltd. (NYSE:BAP) (BAP), a financial holding company, and precious metals miner Compania de Minas Buenaventura (NYSE:BVN) , (BVN).
-By Anthony Harrup, Dow Jones Newswires; (5255) 5080-3450, anthony.harrup@ dowjones.com
(END) Dow Jones Newswires 04-27-06 0938 Copyright (c) 2006 Dow Jones & Company, Inc.
