Just in:
Ingdan Announces 2023 Annual Results // Sunshine’s Debut Features Leave Tech World Scratching Its Head // German Job Market Resilience Bodes Well for Economic Recovery // US reiterates concern over Kejriwal arrest, Cong accounts // Infineon and HD Korea Shipbuilding & Offshore Engineering jointly develop ship electrification technology // New Nylon Constant Torque Hinge From Southco Provides Position Control In A Compact Package // Sharjah Chamber Breaks Ground on Final Expansion with New HQ Pact // Digital Hub Unveiled: Xposure Launches Platform for Global Photography Community // Melco Style Presents “SANRIO CHARACTERS STUDIO CITY CARNIVAL” – Explore a SANRIO World of Unlimited Love and Cuteness // Samsung Electronics Launches 2024 Neo QLED 8K, Neo QLED, and OLED Displays to Spark the AI Screen Era // U.S. Compliance Takes Center Stage at OKX Following Industry Jitters // Experience Ultimate Shopping Freedom at 4.4 Shopee Spree: Don’t Worry, Shop Shopee! // French Leaders Gather for Interfaith Iftar Dinner // Ajman Celebrates Conclusion of Ramadan Activities with Grand Ceremony // Andertoons by Mark Anderson for Thu, 28 Mar 2024 // CABSAT 2024 Ushers in 30 Years of Media Innovation // Following the Money Trail: US and UK Investigate $20 Billion in USDT Transfers Tied to Sanctioned Russian Exchange // Samsung Partners National Heritage Board to Bring a Slice of Singapore’s Cultural Heritage to Samsung The Frame TV // Andertoons by Mark Anderson for Fri, 29 Mar 2024 // First-Ever Fortune Innovation Forum Draws Top Global Leaders to Hong Kong, Promoting Agendas On Collective Cross-Sector Advancement //
HomeMarketsTrump’s campaign rhetoric raises stakes in Mexico

Trump’s campaign rhetoric raises stakes in Mexico

47fdc6e2 e4a8 11e6 8405 9e5580d6e5fb

Mexico has been in the crosshairs this week as US president Donald Trump held true to his campaign rhetoric and ordered the construction of a wall along the Mexican border, with White House press secretary suggesting a 20 per cent tax on imports could pay for it.

With relations between the two countries on course for crisis, has Mr Trump done enough to scare investors away from Mexican financial markets or are they holding firm until the stand-off plays out?

ADVERTISEMENT

Currencies

Trading in Mexico’s peso has developed a V-shaped pattern this year. Within 10 days it had dropped more than 6 per cent to a record low of 22.03 pesos. But the past fortnight has seen it recover nearly 5 per cent, much of that being regained since Mr Trump’s inauguration day.

Volatility is the peso trader’s constant companion. On Wednesday, it gained more than 2 per cent, despite Mr Trump signing executive orders to build the wall and curb illegal immigration. When Mexican president Enrique Peña Nieto cancelled his trip to Washington on Thursday, the peso fell more than 1 per cent. And on Friday, buying traders returned — the peso rose 0.9 per cent.

All this illustrates the danger of betting on positive peso signals prematurely, says Ulrich Leuchtmann, forex strategist at Commerzbank. “Anyone who does that underestimates the ability of the US administration to come up with surprises,” he says.

Traders are trying to work out whether the peso is now cheap, which might explain some of this week’s buying activity. The problem is trying to work out how the US-Mexico impasse will unwind.

The backdrop is a world of change, underlying structural tensions and trade inconsistencies, says Stephen Jen of Eurizon SLJ Capital.

“We see Mexico as being at the crossroads of many of the issues that are being discussed at present, and the only positive for the peso is its cheap valuation,” he says.

Equities

While the peso has been at the sharp end of geopolitical ructions, Mexico’s main equity market has remained largely insulated from souring US relations.

The blue-chip IPC is up more than 4 per cent since the start of the year and more than 12 per cent in the past 12 months.

Some stocks are benefiting directly from Mr Trump’s plans. Shares in Cemex rose to an eight-year high last week as investors bet that the world’s second-largest cement producer would profit from a massive construction project on its doorstep.

However, bank strategists are wary of the long-term outlook. UBS is forecasting a dip in the average forward price-to-earnings ratio from 17 times to 14-15 times this year across the index as growing risks are priced in.

Bonds

The threat of “America-first” policies has already had a negative impact on prices for Mexican bonds, which reflect rising concerns about the country’s creditworthiness.

Mexico has one of the largest and most liquid bond markets of any developing country — in 2015 it was even able to issue a 100-year bond — yet has been largely absent from the rush of new emerging market debt this month.

Benchmark 10-year sovereign bonds are trading at a yield of 7.58 per cent — up from 6.18 per cent before the US election — a higher rate than Colombia, which carries a lower credit rating.

Investors say Mexican bonds are subject to the same concerns about a stronger US dollar as other emerging market credit, but are being dragged down further by particular worries about the economic impact of US policies targeting Mexico and the jump in inflation. If inflation is high and interest rates rise, bonds paying fixed sums will look less attractive.

Nomura predicts inflation will overshoot the 4 per cent upper target limit this year as fuel prices rise. “Mexico’s central bank has little choice but to continue hiking interest rates,” says Carlos De Sousa at Oxford Economics.

Source link

ADVERTISEMENT

ADVERTISEMENT
Just in:
Ingdan Announces 2023 Annual Results // Melco Style Presents “SANRIO CHARACTERS STUDIO CITY CARNIVAL” – Explore a SANRIO World of Unlimited Love and Cuteness // Universal Language for Healthcare: General Authority Embraces Global Coding System // Hong Kong Crypto Exchange Application Stalled by US Lawsuit // Infineon and HD Korea Shipbuilding & Offshore Engineering jointly develop ship electrification technology // Experience Ultimate Shopping Freedom at 4.4 Shopee Spree: Don’t Worry, Shop Shopee! // New Nylon Constant Torque Hinge From Southco Provides Position Control In A Compact Package // French Leaders Gather for Interfaith Iftar Dinner // First-Ever Fortune Innovation Forum Draws Top Global Leaders to Hong Kong, Promoting Agendas On Collective Cross-Sector Advancement // Sunshine’s Debut Features Leave Tech World Scratching Its Head // Ajman Celebrates Conclusion of Ramadan Activities with Grand Ceremony // Sharjah Chamber Breaks Ground on Final Expansion with New HQ Pact // Andertoons by Mark Anderson for Thu, 28 Mar 2024 // German Job Market Resilience Bodes Well for Economic Recovery // Hope for Respite as UAE Endorses UN Plea for Gaza Truce // TUMI Hosts Global Launch Event in Singapore to Unveil Women’s Asra Collection and Announce Global Ambassador, Mun Ka Young // Digital Hub Unveiled: Xposure Launches Platform for Global Photography Community // CABSAT 2024 Ushers in 30 Years of Media Innovation // Saudi Arabia Unveils Green Financing Tool to Achieve Net-Zero Goals // Following the Money Trail: US and UK Investigate $20 Billion in USDT Transfers Tied to Sanctioned Russian Exchange //