Having an up-to-date and real-time financial data platform is an essential tool to study your movements on the stock market and monitor the behavior of your assets to take advantage of opportunities more effectively and make the best decisions.
Financial markets, as indicated by the Bank of Mexico, are the physical, virtual, or mixed space where the exchange of financial instruments is carried out, their prices and operation volumes are determined.
Thus, we can find financial markets in which financial securities such as bonds, raw materials, currencies, funds, cryptocurrencies, in addition to so-called derivative products such as futures, options, and/or contracts for difference are listed and exchanged.
The functions of the markets are:
- Reduce intermediation costs, which allows a greater circulation of products.
- Establish the mechanisms that enable contact between the participants in the negotiation.
- Manage product liquidity flows or liquidity flows from one market to another market.
- Set the prices of financial products based on their supply and demand.
In such a way that, depending on the instrument traded, the financial market rate is limited. The totality of markets and their interactions move the global economy.
In Mexico, the most relevant markets are:
Each of these markets presents investment vehicles with specific conditions and characteristics that constantly increase or decrease in value, generating investment or speculation opportunities.
To take advantage of the greater benefits that these opportunities grant and build strategies for greater profitability, a stock market analysis must be carried out in which the financial assets, the market conditions, and the characteristics of the operation that is being carried out are studied and monitored.
All this analysis requires specific and updated information to define what, when, and how to act on an investment.
Analysis and evaluation projects investment
The stock market analysis studies the elements and characteristics of a specific investment, in which relevant financial information is gathered that is used to make purchase or sale decisions.
This type of analysis is integrated by two others that involve different approaches and are related to investments of different terms:
Here all the variables that directly or indirectly impact the real value of the asset to be analyzed are studied, from the internal variables of a company to those of the economy that influence the price of shares.
The consultation of economic, business, and political news as well as related data such as speeches and measures by central banks, GDP and CPI data, economic indices, etc. All this allows making a prediction of the price that a certain financial instrument will have.
Its advantage lies in carrying out global monitoring of the market, generally, it is used more in long-term investments.
It relies on tools like charts to identify movement patterns and trends, oscillators, and indicators. With this, predictions are made of the future behavior of a listed price in a certain financial instrument to choose the best time to open a position.
Whether for assets such as Forex market currency pairs, stock indices, or stocks, behaviors can be predicted at precise times, so it is more used for short and medium-term investments.
Each investment is linked to the profile and strategy of each investor, however, in general, the database that must be counted on for comprehensive analysis is:
The economic and financial situation of the market
Knowing the direction that the markets are taking is possible through the indices, which provide information in real-time as if they were a photograph of a certain moment in the financial markets.
For investors, they serve as reliable benchmarks to assess the performance of instruments, actively managed funds, and investment portfolios compared to the market.
The more indices you have on hand, the more flexible you can monitor and evaluate markets.
Each investment product is linked to all the securities, a representative sample, or other assets that are part of an index, so knowing the difference between the index and the linked instrument is crucial to understanding the nature and role of both.
To create them, methodologies are used that manage to cover different classes of assets such as stocks, bonds, and commodities, among others.
In the case of Mexico, the Mexican Stock Exchange (BMV) together with S&P Dow Jones Indices exposes indices that serve as indicators that seek to reflect the behavior of the Mexican stock market as a whole or of different groups of companies with some characteristic in common. In Mexico, the reference index is the S&Ps BMV IPC.
The Dow Jones Industrial Average (The Dow) and the S&P 500 is the market benchmarks par excellence. Both form the basis of numerous investment products, are published by S&P Dow Jones Indices, and track the performance of stocks issued by large companies in the United States.
“With more indices, it also broadens the set of opportunities for issuers of investment products to create ETFs and other useful tools for investors with diverse interests,” according to S&P Dow Jones Indices.
Most indices fall into one of the following categories:
- Equity indices: they are made up of a certain number of shares and are used for the general level of behavior of the equity market in general, or of some subset of it.
- Fixed Income Indices: Track the prices and yields of fixed income securities, including government bonds and corporate-issued bonds.
- Commodity indices: compile the variations in the prices of a basket of futures contracts on commodities –raw materials for industrial and commercial products–.
- Strategy indices: They mimic a series of strategies implemented in the market, instead of directly measuring the performance of the market.
- Economic indices: it is a set of samples that share relevant characteristics. They have transparency, depend on rules, methodologies, and data that are publicly available.
Opening of financial markets
Each financial market is updated after the weekend or holidays, the moment they open for trading is known as the market open.
Each region has different opening times, since the working days they handle are different, however, in the case of the Forex or foreign exchange market, its opening is constant, opening one after another.
Risks in the financial market
Although all investments present a level of latent risk, to balance the search for greater profitability, it is necessary to have access to a large amount of financial information.
The more elements you have to study, compare and evaluate, the less uncertainty there will be, and in this way the risk is minimized.
Regardless of the investor’s profile, they must have a professional adviser and access to a system of adequate and up-to-date tools that allow them to obtain a general overview of market movements to seek the best profits and the least possible risk.
The National Banking and Securities Commission (CNBV) defines market risk as:
“The potential loss in the value of financial assets due to adverse movements that affect the valuation of positions due to asset, liability or contingent liability operations, such as interest rates, exchange rates, price indices, among others. ”.
Three types of market risk are distinguished:
- Currency risk
It is related to the changes in the prices of foreign currencies, as a consequence of the volatility and the position that the agent has in each currency, that is, the variations of the exchange rate.
This type of risk occurs in operations in which the currency with which an operation is carried out value increases and consequently the entire operation raises its cost.
- Interest rate risk
It occurs when the interest rates of assets and liabilities rise or fall about the assets held in the portfolio, at undesired times.
In general, both for financial entities and companies, institutional investors, and individual investors, this type of risk is latent in the face of variations in the price of money.
However, it affects them differently depending on the direction in which the value is shifted.
- Market or portfolio risk
Losses of an investment portfolio as a result of operations or factors on which it depends.
Forecasts, cycles, and economic indicators
Economic indicators are the set of data represented in statistical values to expose the situation in which the economy of a country finds itself by reflecting how the main economic variables behave.
Its correct evaluation and interpretation help to understand the situation and economic performance of the past and present to forecast the future and take precautions or market actions.
Its application can be made in the study of economic cycles, which are periods of expansion and contraction experienced by the general level of activity in a country.
The study What the indicators indicate by the National Institute of Statistics and Geography (INEGI) points out:
“The decisions you make around your investments, your businesses, and your own employees will be different depending on the stage we are in.
Economic indicators behave differently in the way they are associated with the different phases of the economic cycle. For this reason, one of the most important reasons for studying and analyzing the indicators is to understand where we are in the cycle and where we are going”.
Economic indices, together with variables such as economic growth, exchange rate, profit margins, among other elements, are used to make financial forecasts.
In this way, the expectations incorporated in the asset prices and the possible scenarios in terms of risk and return are indicated.
The information that makes up these economic indicators is highly sensitive and relevant to the conditions presented by the general economy to which it refers, as well as the level of latent uncertainty in the market, so it is essential to take them into account in any financial analysis.
Main economic indicators
To carry out a stock market analysis about your investments, you must select the indicators that affect the investment product that you are working on.
In the case of Mexico, the most relevant indicators are:
- National Consumer Price Index (INPC): it estimates the evolution of the prices of goods and services consumed by families in Mexico.
- Gross Domestic Product ( GDP ): It is considered the most complete indicator although it is issued quarterly.
It is published by the INEGI every 15 days.
It is the sum of the market values of all services and final goods –that is, of final consumption–, which are the product of the resources (labor and capital) of the economy that resides in the country.
- Price and Quotation Index: the BMV indicates it as “the official indicator of the evolution of the stock market since it seeks to measure the performance of the largest and most liquid stocks listed on the Mexican Stock Exchange.”
- Interest rate: Its value is set by the Bank of Mexico and it works as a reference among financial entities to lend money. Refers to the profitability of a savings or investment, as well as the cost of a loan.
It functions as the main reference for market participants and is calculated daily by Standard and Poor’s (S&P).
It shows the oscillations in the prices of the currencies in the international exchange markets.
- Country Risk: indicates the possibilities and conditions of a country to adequately cover its payment obligations to its external debt.
- Balance of Payment: all economic and financial transactions carried out abroad are recorded in a special account called the balance of payments.
“The sovereign rating is a reflection of the risk associated with the payment of long-term bonds or financial instruments in the foreign currency issued by the government,” says INEGI.
This indicator gives us the possibility of visualizing the inflows and outflows of foreign exchange concerning the statistics of international trade payments, in addition to seeing the level of indebtedness of a country.
Stock market report for decision making
Companies that issue capital and/or debt securities that require financing to carry out various projects are known as issuers.
These offer their securities on the stock market, which in the case of Mexico is the Mexican Stock Exchange, they can be bought and sold (secondary market) through a brokerage house registered and authorized by the CNBV.
Once shares or debt securities have been purchased, their performance can be monitored in specialized newspapers, or through printed and electronic information systems.
The information contained in these systems gives investors the possibility of integrating their own stock market report concerning their financial statements, to forecast the direction of their assets and continue working on their returns.
Having a financial intermediary, such as brokerage houses, provides professional financial advice, however, the final decisions regarding the securities or financial products in which the money is placed are made by the contracting clients.
Industrial, Commercial and Service Companies, Financial Institutions, the Federal Government, State Governments, and Government Institutions or Organizations are the securities issuers that make up the Stock Exchange.
All of them must provide the CNBV with economic, accounting, legal, and administrative information, in the form, terms, and frequency established in the various provisions, according to the type of instrument issued by the company.
So each issuer submits reports and financial statements on a monthly, quarterly and annual basis to report the status of their securities on the stock market.
In conclusion, a robust and updated financial information system is vital to build, monitor, and improve the profitability of an investment.
Grupo Financiero Monex’s Private Banking offers its clients a web query platform called Analytics, an aid in decision-making for all investors. In it you will find:
- Consultations on economic data, series, and estimates. (Currencies, rates, indices, commodities).
- Stock markets, companies, target prices, growth estimates.
- Quick and timely responses to the advisor (an advisor = an analyst).
- Exportable reports to PDF or Excel.
- Continuous development of products for “self-service” (rates, SIC, technical analysis information).
Take advantage of our extensive database, monitor your profitability at the time you want, and connect with the latest news about the trends of your portfolio.
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