Foreign exchange hedges benefit companies listed on the Stock Exchange

Companies that carried out currency purchase and sale operations and used exchange hedges managed to save 3,110 million pesos between January 2019 and September 2022, according to a study by Grupo Financiero Base.

The bank revealed that this figure comes from a study of more than 20,000 operations of companies with international operations or with an export profile.

“The data reveals that companies that generate internal competencies to create hedging strategies and adequate advice to mitigate exchange risks, managed to overcome the volatility episodes that have been triggered in recent years much more effectively,” said Nicolás Eguiarte Corona, Exchange Director of Mexico City at Grupo Financiero Base.

The Banco Base study indicates that among the terms considered most effective for hedging are those that cover periods of 28 to 35 days.

“In the analysis carried out, 38% of all operations with terms greater than 137 days were carried out during 2020, just at the beginning of the Covid-9 pandemic, and this would seem to indicate that to the extent that companies perceive scenarios with greater uncertainty, they are willing to cover longer-term operations”, says Grupo Financiero Base.

Carlos González, Director of Analysis at Monex Casa de Bolsa, explained that the companies on the Mexican Stock Exchange that contract the most coverage are Bimbo, Gruma, producers of raw materials (such as the mining companies Grupo México and Industrias Peñoles) and exporters.

He assured that the hedges help companies to protect themselves from the volatility in the exchange rate, so that they do not suffer a significant impact in case it shoots up.

Successful hedges

Grupo Financiero Base assures that for exporting companies, 7 out of 10 hedging operations carried out were successful, while for companies with international operations “they represented a source of certainty.”

Carlos González assured that the strength of the peso against the dollar helps companies in the Price and Quotation Index (S&P/BMV IPC) to prevent the costs of their raw materials from skyrocketing and falling slightly, due to the fact that most of the stations are input importers.

sebastian.diaz@eleconomista.mx