ETFs
Mexican Assets Have Worst Day Since 2020 Lockdown: Why Sheinbaum Is Shaking Investor Confidence – iShares Inc iShares MSCI Mexico ETF (ARCA:EWW), Direxion Daily MSCI Mexico Bull 3X Shares (ARCA:MEXX)
A professional trader for 20 years reveals his “MoneyLine”
Ditch your indicators and use the “MoneyLine”. A simple line tells you when to buy and sell without any guesswork. It’s a line on a chart that helped Nic Chahine win 83% of his options purchases. Here’s how he does it.
Financial assets linked to Mexico experienced their worst day on Monday since the global lockdown in March 2020, following the landslide victory of the new government. President-elect Claudia Sheinbaum.
What happened: The Mexican peso fell 3.9% to 17.68 per dollar, recording its worst day in four years.
It is heading towards a session close at its lowest level since November 2023.
Mexican exchange-traded funds (ETFs) listed in the United States suffered double-digit losses. THE iShares MSCI Mexico ETF (NYSE:EWW) fell 10.8%, marking its worst day since Monday March 16, 2020, when global investors dumped emerging market stocks in favor of safe-haven assets amid fears of a Covid-related global recession .
Leveraged ETFs on Mexican stocks also saw significant declines. THE Direxion Daily MSCI Mexico Bull 3X Stock (NYSE:MEXX) fell by 31%. It is eyeing its lowest close since late October 2023.
The results of the elections, which saw the president Claudia Sheinbaum winning around 60% of the vote. This is the highest level in Mexico’s democratic history, triggering violent volatility in the peso and Mexican ETFs.
Chart: Mexican peso had its worst day in four years after Sheinbaum’s election victory
Chart: US-listed Mexican stock ETF suffers biggest one-day losses since March 2020
Why is this important: Goldman Sachs economists suggest that a Sheinbaum administration could not seriously undermine macroeconomic stability. Sheinbaum will also not limit the independence of the central bank, nor significantly weaken fiscal policy.
However, a Morena-led Congress may be reluctant to approve necessary reforms or adopt measures needed to attract investment, take advantage of offshoring opportunities and keep Mexico on a “disciplined fiscal path,” the cabinet noted.
And Sheinbaum’s parliamentary coalition includes Morena, the Labor Party and the Ecological Green Party of Mexico. Sheinbaum could potentially obtain a “supermajority” of two-thirds of the seats in Parliament.
According to Mexican electoral sources, the Morena-PT-PVEM coalition is expected to win 346 to 380 seats out of 500 in the Lower House.
Recent Latin American history has seen left-wing parties prioritize equality and social justice.
“These results give Ms. Sheinbaum a very strong mandate and reinforce Morena’s presence in central and local political power structures,” noted Goldman Sachs.
In February, the AMLO administration submitted a major package of bills to Congress. Many of the bills involve constitutional revisions aimed at reshaping key institutions such as the Electoral Institute and the Supreme Court. They also weaken or eliminate autonomous agencies.
These proposals also included populist and costly pension and minimum wage measures.
“Some bills are seen as leading to institutional erosion and weakening current checks and balances; and several are not considered market friendly,” the US investment bank wrote.
The main challenge for Sheinbaum will be to “strengthen market sentiment and provide a predictable and investment-friendly policy and regulatory framework.” Disciplined fiscal management, progress in public security, and effective management of state-owned enterprises are also essential to preserve market confidence and sovereign debt ratings.
Read also: Mexico’s first female president supports cannabis: Will Claudia Sheinbaum legalize marijuana?
Image: Shutterstock
A professional trader for 20 years reveals his “MoneyLine”
Ditch your indicators and use the “MoneyLine”. A simple line tells you when to buy and sell without any guesswork. It’s a line on a chart that helped Nic Chahine win 83% of his options purchases. Here’s how he does it.
ENTER TO WIN $500 IN STOCK OR CRYPTO
Enter your email and you’ll also receive the ultimate morning update from Benzinga AND a free $30+ gift card!
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.