This week we look at the growing base of tech-savvy retail investors in Mexico, and how best to approach them to boost liquidity and valuation for Mexican listed companies.
Compared to the USA, and even Brazil, Mexico has a small tech-savvy retail investor market, but it is at least growing fast. In its most recent report, the CNBV notes that in June of 2019 there were a little over 280,000 investment accounts, distributed among the country’s 35 brokerage firms. One year later, 218,000 new accounts have been opened and for the first time there are more than half a million accounts in Mexico.
During the first six months of 2020, 150% more accounts were opened than in the previous 10 years. This growth, which is a worldwide phenomen, can be largely explained by three factors. First, retail investors have had more spare time (sitting at home) given the COVID-19 related restrictive measures imposed by governments, allowing them to explore alternative measures to that of traditional savings accounts, but only those with a strong digital onboarding and execution offering. Second, the big jump in tech and digital progress seen during the last decade has allowed brokerage firms to reduce their costs per managed account. This reduced the minimum required amount to open a new account with amounts as low as $1,000 pesos, and gave individual investors the necessary tools to invest easily from their phones and computers. Third interest rates have fallen, reducing the incentive to park your money in savings accounts.
Within the brokerage firms registered at the CNBV, GBM is the one with highest growth during the last months. In May 2019, Actinver had the biggest market share by amount of accounts with 22.54% followed by Kuspit with 10.80%, Casa de Bolsa Banorte-Ixe with 10.28%, GBM with 8.58%, Vector 8.24%, and the remaining 39.56% distributed among the other brokerage firms. When we fast forward to May 2020, the market has reshaped: GBM has a market share of 40.58% of the total number of open accounts, followed by Actinver with 15.81%, Kuspit with 8.19%, Casa de Bolsa Banorte-Ixe with 5.66%, Vector with 5.34%, and the remaining brokerage firms combine for 24.42%.
Naturally most of these new digital accounts are very small in Peso-terms, and by retail Assets Under Management BBVA, Citibanamex, Inbursa, Santander, Banorte, Invex, Scotia among others remain for sure far larger. They should continue to be the retail focus of investor relations areas of large companies. Also many independent advisors (ie, MG Captial, Virtus..) have grown rapidly at the same time, and operate through these same brokerage accounts. But little by little the large players and independent advisors are having to react to the upstarts and offer more cost effective digital offerings or risk losing out on the millennial investor market. As elsewhere in the world, Mexico’s retail investor market is going to be much more tech and APP-driven going forward than in the past.
What should Mexican companies do to attract this new public? First they should take the retail market more seriously than in the past by deepening ties with private banks, independent advisors, investor apps and so on, via NDRs, ZOOMs, webinars, commentary. Second, they should make sure Investor Relations material is digital friendly, on social media, (Twitter, LinkedIn), an important source of information for retail investors, and generally visible on the Apps and web sites that tech savvy investors use (Yahoo Finance, Google Finance, Seeking Alpha, Investing.com.mx etc.). Third, they should ensure that external communication is highly coordinated with investor relations when it comes to press, radio and TV. Fourth they should prepare in Spanish retail-friendly investor materials, focusing on big themes, mega trends. Fifth, they should develop and disseminate ESG integration, an important value for millennial investors.
As always Miranda-IR is happy to help in this regard.