FINAL Flashcards
(29 cards)
What is INDEVAL?
- S. D. Institución para el Depósito de Valores
- It is a financial market infrastructure responsible for the safekeeping, settlement, and transfer of securities traded in the Mexican capital market
- Central Securities Depository (CSD) in Mexico
Core functions of INDEVAL
Custody of Securities (electronic safekeeping)
Trade Settlement
Corporate Actions Management
Maintenance of Ownership Records
International Custody (via global custodians for SIC
What is Trade Settlement (DvP)?
Synchronous exchange of securities from seller to buyer and money from buyer to seller.
It reduces settlement risk.
What is RNV?
Registro Nacional de Valores
It is a public, official registry managed by Mexico’s financial regulator, the CNBV (Comisión Nacional Bancaria y de Valores), and it serves as the legal gateway for securities to be offered, traded, and distributed in the Mexican market.
Core Functions of the RNV
Register issuers (companies, governments, trusts, etc.)
Register securities authorized for public or private offering
Register financial intermediaries and advisors
Ensure disclosure and transparency
Support investor protection
Who manages the INDEVAL?
BMV Group
What is the SIC?
The Sistema Internacional de Cotizaciones (SIC) is a mechanism within the Mexican financial market infrastructure that allows Mexican investors to buy and sell foreign securities.
SIC Key Characteristics
Traded in pesos, but reflect prices from foreign markets
Accessible via Mexican brokerage firms
Uses Indeval for settlement and custody through foreign custodians
Investors have access to dividends and capital gains as if they held the asset abroad
Institutions Involved in the SIC
CNBV → Approves the foreign securities for public offering in Mexico
RNV → Registers the foreign securities with limited disclosure
BMV/BIVA → Enable trading on their platforms
Indeval → Handles custody and settlement via global custodians
Brokers → Offer the securities to investors through normal channel
What is an ADR?
American Depositary Receipt (ADR)
An ADR is a negotiable certificate issued by a U.S. bank
It represents shares of a foreign company
It allows U.S. investors to invest in foreign companies as if they were U.S. stocks, without dealing with foreign exchanges, currencies, or regulations
The first ADR was created in 1927 by J.P. Morgan, with British retailer Selfridges as the first issuer
American SIC
How do ADRs work?
A U.S. depositary bank (e.g., BNY Mellon, Citi, JPMorgan) sets up an ADR program for a foreign company.
The bank purchases or holds the foreign company’s shares through a custodian bank in the home country.
It then issues ADRs in the U.S. market, representing the shares.
U.S. investors buy and sell these ADRs like any other U.S. stock, in USD, through regular brokers
Types of ADRs
Sponsored:
Created with the cooperation and approval of the foreign company.
Managed by a single depositary bank.
Traded on stock exchanges.
Unsponsored:
Created without the involvement of the foreign company.
Can be managed by multiple depositary banks.
Traded OTC.
What is Arbitrage?
Arbitrage is a strategy that involves taking advantage of a price difference for the same or equivalent asset being traded in two or more different markets, by buying where the asset is cheaper and selling where it is more expensive, simultaneously or nearly simultaneously, to obtain a risk-free profit.
Arbitrage Characteristics
Helps eliminate price inefficiencies between markets
Involves the same or identical asset
Executed simultaneously (or with minimal timing difference)
Carries no market risk
Arbitrage Barriers
Access to both markets is required: Brokerage and Bank account in both countries
Commissions: brokerage and conversion fees
Currency Spread
What are Stock Market Indices?
A stock market index is a statistical indicator that measures the performance of a specific group of publicly traded stocks.
Main Purpose: To summarize the performance of a set of companies in a single value so that we can understand how a market or sector is doing without analyzing each individual stock.
Indices Examples
S&P/BMV IPC: Índice de Precios y Cotizaciones.
S&P/BMV INMEX: Índice México
S&P/BMV IMC 30: Índice de Mediana Capitalización
S&P/BMV IRT: Índice de Rendimiento Total
FTSE BIVA: Financial Times Stock Exchange
Main International Indices
DAX, Germany, 30, Frankfurt Stock Exchange (Xetra)
CAC 40, France, 40, Euronext Paris
FTSE 100, United Kingdom, 100, London Stock Exchange
Nikkei 225, Japan, 225, Tokyo Stock Exchange
Hang Seng, Hong Kong / China, 48, Hong Kong Stock Exchange
NASDAQ-100, United States, 100, NASDAQ
S&P 500, United States, 500, NYSE and NASDAQ
IBOVESPA, Brazil, Varies (80-90), B3 (Brasil, Bolsa, Balcão)
Latibex 10, Spain / Latin Am., 10, Latibex (BME, Spain)
Valuation by Multiples
Valuation by multiples is a relative valuation method that estimates the value of a company by comparing it to similar firms using standardized financial ratios — known as valuation multiples.
The assumption is that similar companies should trade at similar multiples, unless there’s a strong reason they shouldn’t
Enterprise Value Multiples
What do they measure?
The value of the entire business, including both debt and equity holders
When are they used?
When you want to evaluate a company’s operating performance regardless of how it’s financed
Why use them?
They are capital-structure neutral
Ideal for comparing companies with different leverage level
Equity Value Multiples
What do they measure?
Only the value of the shareholders’ equity, not including debt.
When are they used?
When you want to evaluate returns from a shareholder’s perspective.
Why use them?
They show how much investors are paying
Common in public equity analysis and trading
What is P/E?
The P/E ratio tells you how much investors are willing to pay for each dollar of net income the company generates.
P/E= Price per Share/Earning per Share
P/E= Market Cap / Net Income
How to interpret P/E?
High P/E: high expectations of the market (rational or irrational)
Low P/E: undervalued or the company is riskier
What is technical analysis?
Technical analysis is the study of historical price and volume data to try to predict future market movements.
