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Santander Unit Surges as IPC Index Adds Bank: Mexico City Mover

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May 7 (Bloomberg) -- Grupo Financiero Santander Mexico SAB, the Mexican unit of Spain’s biggest bank, jumped the most in seven months after the local stock exchange said it will be added to its benchmark equity index.

Santander Mexico climbed 5.3 percent to 41.08 pesos at the close of trading in Mexico City, the biggest advance since its $4.1 billion share offering in September. The IPC index of 35 Mexican companies rose 0.1 percent.

The lender will join the benchmark gauge on June 3 with a weighting of about 3 percent, replacing brewer Grupo Modelo SAB, according to a statement yesterday from the Mexican stock exchange. IPC membership can drive up flows for new additions, because dozens of funds are indexed to the Mexican benchmark, according to Lilian Ochoa, an analyst at Corporativo GBM SAB. Modelo is leaving the index after being acquired by Anheuser-Busch InBev NV in a $20.1 billion deal.

“As a short-term catalyst, you have the fact that it’s moving onto the index,” Ochoa, who recommends buying the bank’s shares, said in a telephone interview from Monterrey, Mexico. “Beyond that, you also have solid fundamentals.”

Santander Mexico trades at 15.9 times trailing 12-month earnings, compared with 18.9 times for Grupo Financiero Banorte SAB and 17.9 times for Banregio Grupo Financiero SAB, according to data compiled by Bloomberg. The IPC trades at 18.8 times trailing earnings.

To contact the reporter on this story: Jonathan Levin in Mexico City at jlevin20@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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