During January, foreign investors took 1,039 million dollars in government securities from Mexico, an entry that represents a slowdown compared to the 6,000 million they captured in December, explained the deputy director of analysis at Monex, Janneth Quiroz.
Although the timely statistics from Banco de México (Banxico) show a disinvestment of 39,000 million pesos in January, the expert qualified that the inflow of capital is made in dollars. The strength of the exchange rate against the green currency is what generated a decrease in the exchange rate in pesos, she pointed out.
It is very difficult to think that with a 10.50% rate like the one Mexico was offering in January, investors would not take government securities. Any return above 10%, with a 600-basis point rate spread as it was then is quite attractive, she stressed.
Banco de México records the holding of assets in pesos by type of investor and how they arrive in the country is in dollars; here they change it to invest in instruments in pesos, she pointed out.
“By having a more appreciated exchange rate, for the same amount of dollars that arrive, you receive fewer pesos. So, if you assume the assets in dollars, we see that there was an income,” she specified.
Timely information from Banxico shows that in January there was an outflow of 39.046 million pesos, since the amount of government securities in the hands of non-residents reached 1.66 trillion pesos, which is lower than the 1.70 trillion registered at the end of 2022.
He considered that the slowdown in capital flows to Mexico in January resulted from external factors, such as the more aggressive speech of the Fed. Still in December, the markets assumed that the final rate of the United States cycle would remain at 5%, but it was adjusted up to 5.5 percent.
In the last two months of last year, Mexico attracted 8.668 million dollars to its debt market, with which it managed to reverse six months of capital outflows according to statistics from the Institute of International Finance (IIF).
Latin America, one of the most sought after.
With preliminary information collected by the IIF, it can be seen that during the first month of the year, there was an inflow of foreign capital to the emerging debt markets of Asia and Latin America.
The Asian markets captured 34.400 million dollars, while those of Latin America received 15.900 million.
Like the Monex expert, specialists from the institute anticipate that debt yields in emerging markets will continue to rise.
Exchange rate strength
Janneth Quiroz explained that the strength shown by the exchange rate has to do with the currencies that have entered the country via remittances and exports, in addition to the attractiveness that the differential exchange rate and country risk are awakening.
She anticipates that the flow of remittances to Mexico will continue to strengthen, assuming the good state of the United States (US) labor market and the strength in job creation, particularly where Latinos who send remittances are employed.
She stated that as inflation in the US accumulates six months of deceleration, resources have been released to send remittances.
The contrast is found in Mexico, where the same inflation has reduced the purchasing power of the remittances that have arrived.
Source: El Economista
