A benchmark index represents the performance of a specified securities market, market segment, or asset class. The S&P/BMV IPC seeks to measure the performance of the largest and most liquid stocks listed on the Mexican Stock Exchange (Bolsa Mexicana de Valores; BMV). The index is designed to provide a representative, investable, and replicable measure of the Mexican equities market.
The S&P/BMV IPC was launched on Oct. 30, 1978, as part of a Mexican market revolution, and it has been the icon of the Mexican equity market ever since. In the middle of a long inflationary period, between the devaluation of the Mexican peso and changes in monetary policy regarding the exchange rate, 1978 was a decisive year for the Mexican economy. The country’s central bank implemented new economic and financial policies, marking a new regulatory environment that included tax exemption on capital gains, the approval of the revaluation of certain assets to support listed companies facing a delicate financial situation, and the “Mexicanization” of foreign capital through the stock exchange.1
INDEXING IN MEXICO
The need to measure the evolution of the Mexican equity market existed even before the launch of the Índice de Precios y Cotizaciones (IPC), which is now the S&P/BMV IPC. The first attempt of one of the S&P/BMV IPC’s predecessors, the Promedio de hechos de la Bolsa index from 1910, was calculated as the annual arithmetic average of the values traded by each listed company. However, this first approach was unstable due to the lack of liquidity in the market and the frequent change of listings.
Later on in 1958, the universe was restricted to 11 industrial companies, and the calculation was based on the daily average price. As the capital market grew, the sample of 11 companies became rather unrepresentative. As a result, in 1966, the sample size was changed to 30 constituents, and the calculation methodology was changed to link the average price with the previous value and to introduce adjustments for corporate actions such as splits.2
In October 1978, the BMV started the calculation of the IPC in parallel, making it public on September 1980. Over the course of the past 40 years, the index has evolved, keeping its representation and objectives aligned with the market. In this paper, we highlight the four decades of index history and major milestones, in addition to examining the characteristics of the S&P/BMV IPC as the iconic symbol of the Mexican equity market.
