Salient to Investors:

Foreign investors poured a record $7.36 billion into Mexican debt securities in 2012 to take advantage of economic growth that is four times Brazil’s and yields that are still triple those for US Treasuries.

Luis de la Cerda at Afore Sura said foreigners won’t leave the bonds and are here to stay, and Mexican equities are already expensive relative to earnings. The IPC index is at 18.7 times trailing earnings versus 12.3 times earnings for the MSCI Emerging Markets Index, and at 3.1 times net assets, double the valuation in developing nations.

Bill Gross at Pimco said Mexico’s bonds are attractive because they offer higher yields than US and European debt while Mexico has lower debt levels.

Michael Gomez at Pimco said Mexico has well-behaved inflation, a strong government balance sheet, and steady growth prospects.

Carlos Fritsch at Prognosis Economia Finanzas e Inversiones says sell bonds and buy stocks, which offer the best risk-adjusted return in 2013 as they are more economically sensitive and will bring outsized returns as growth accelerates.

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