Category Archives: Markets

The Donald Trump Show’s surprise winner just might be Mexico

All things being equal, Mexico seems poised to capitalize on the twin benefits of a surging U.S. economy and a weak currency.
All things being equal, Mexico seems poised to capitalize on the twin benefits of a surging U.S. economy and a weak currency.

By Joe Chidley / Financial Post

A surface reading of the Donald Trump’s impact on the global economy suggests that there is one clear and present loser: Mexico. The new president has hurled so many threats down Mexico way, it’s actually hard to remember all of them.

Let’s see, there’s the wall (which he’ll get Mexico to pay for, somehow), and the “big border tax” on Mexican imports, and also the broader border adjustment tax on all imports. There’s NAFTA renegotiation (which, we Canadians like to think, will hurt Mexico more than us) and the crackdown on undocumented immigrants, and the snubs to Mexico’s leadership.

I’m probably missing something, but even that short list adds up to bad news for NAFTA’s third amigo, right? You would think investors must be running for the hills.

And for a time, they did: In the 10 days following Trump’s Nov. 8 victory, the Mexican Bolsa index, or Mexbol, fell off a cliff, plummeting 8.5 per cent and sealing Mexico’s fate as one of the 10 worst-performing markets in the world in 2016.

The story since then, however, provides an interesting counter-story to all the bad news for Mexico. In fact, despite all the doom-and-gloom and the threats from the White House, investors in the Mexican market have been doing rather well, thank you.

Last Friday, the iShares MSCI Mexico ETF – a popular entry point to the Mexican market for outside investors – rose 1.5 per cent, putting the fund’s three-month return near 13 per cent.

More remarkable, perhaps, was that the Mexbol hit (and then surpassed) 48,470 — where it sat at end of day on Nov. 8, 2016, when Hillary Clinton was still widely expected to become the next president of the United States.

So, you might ask yourself, what happened to the Trump effect? Well, this might be in part a case where the disease is part of the cure — namely, the impact on the Mexican peso and the boost it has given to Mexico’s export competitiveness.

AMLO steals spotlight as Nafta woes ease

Bloomberg – With White House officials saying they’re confident a trade deal can be reached to benefit both Mexico and the U.S., the peso has regained more than half of the losses it saw after Donald Trump’s victory pushed it to record lows. Talks aren’t expected until late this year, allowing investors to turn their attention to the next big risk for the Latin American country: a presidential win by opposition candidate Andres Manuel Lopez Obrador, known as Amlo.

Jose Cuervo raises most in IPO since 2013

Bloomberg – Shares of Jose Cuervo, the world’s biggest tequila maker, sold for 34 pesos each, the high end of the projected range, said people, who asked not to be identified. Cuervo’s $791 million offering makes it the country’s largest IPO in dollar terms since Grupo Lala raised an initial $938 million in October of 2013.

Central bank confirms 2nd forex intervention

Reuters – Mexico’s central bank confirmed it had sold dollars during the Asian trading session on Friday, its second intervention the day after it did the same during Mexican and U.S. trading hours to fight a slump in the peso. At 7:45 a.m. Mexico City time, the peso was up 0.53 percent at 21.31 pesos per dollar.

IEnova to offer $350 million in primary stock offer

Reuters – Infraestructura Energetica Nova will offer about $350 million in a primary stock offering later this month, the firm said on Monday. The offer will consist of 323 million shares, but could rise to 380 million shares, including over-subscription options and additional placement options. The company, known locally as IEnova, is a unit of U.S. firm Sempra Energy. 

Wall Street Is Souring on Mexico’s Stocks as Bull Market Flags

The IPC has dropped 2.1 percent in pesos since reaching a record high in early August.
The IPC has dropped 2.1 percent in pesos since reaching a record high in early August.

By Michelle Davis / Bloomberg

The seven-year bull run in Mexican stocks might be coming to an end.

Strategists and investors are tempering their expectations as corporate profits slide, economic growth slows and the U.S. presidential election rattles investors.

UBS expects a 10 percent drop in the IPC index by the end of the year. BTG Pactual cut its recommendation on Mexican stocks to underweight last week. Barclays says valuations are bound to fall.

This month, Mexico’s biggest stock ETF has seen the largest withdrawals in two years.

The increasingly bearish sentiment is closely tied to a rout in the peso that has made it the worst performing major currency amid prospects that Donald Trump will win the U.S. presidential election and make good on pledges to renegotiate trade accords.

While the peso has recovered from record lows, international investors have been hit hard in recent weeks. The IPC index has fallen 3.4 percent in dollar terms since the Republican convention, compared with a 5 percent gain in the MSCI Emerging Markets stock index.

“Things have changed and it makes it very difficult to predict where we might end up by year-end,” said Benjamin Theurer, an equity analyst at Barclays in Mexico City. “At the beginning of the year, I wasn’t considering Trump would actually make it to be a nominee. It’s going to be volatile.”