Urbi Desarrollos Urbanos SAB led a surge in homebuilders after Mexico offered to cover as much as 30 percent of banks’ losses on loans made to the nation’s homebuilders.
Urbi soared 19 percent to 4.8 pesos in Mexico City trading, the biggest gain since October 2008. Desarrolladora Homex SAB and Corp. Geo SAB each rose 14 percent. The Habita index of six homebuilders surged 11 percent, the most since November 2008.
Bonds also rallied. Yields on dollar debt from Homex, Mexico’s biggest homebuilder, due in March 2020 tumbled 92 basis points, or 0.92 percentage point, to 9.82 percent today, according to data compiled by Bloomberg. It’s the biggest yield drop since the debt was issued in February 2012. The yield on dollar debt from Urbi due in 2022 declined 80 basis points to 13 percent, after a 38 basis-point drop yesterday.
Urbi, Geo and Homex each said in separate statements to the Mexico stock exchange that they had nothing to disclose regarding the increase in their shares.
Homebuilders’ securities, which have plunged this year after disappointing earnings and credit rating reductions, rebounded after today’s announcement eased concern about the industry’s ability to access financing. Those with “healthy balance sheets” will have access to additional funding of as much as 15 billion pesos ($1.2 billion), according to a statement today from the Finance Ministry.
Concern about the homebuilding industry has increased since President Enrique Pena Nieto said Feb. 11 that he will use the government’s subsidized-housing program to promote urban apartment building projects, which require longer planning, building and sales cycles than single-construction housing.
While the industry still requires a more comprehensive solution, the government’s announcement is positive for homebuilders in the short-term, said Aldo Miranda, an equity trader at Intercam Casa de Bolsa SA in Mexico City.
The guarantees are “a positive sign from the government showing they are willing to work together and provide the tools for them to recover from this crisis,” Miranda said.