Tag Archive for: President Donald Trump
After being punished last year on speculation that now President Donald Trump could win the 2016 presidential election, the iShares MSCI Mexico Capped ETF (NYSEArca: EWW) is rebounding in earnest this year.
EWW, the largest Mexico ETF trading in the U.S., is higher by more than 9% year-to-date and has surged almost 7% over the past month.
With the peso also sliding in the wake of Trump’s win, the Mexico’s central bank could move forward with more rate hikes to stem the currency’s slide.
Although Mexico’s central bank said the first rate hike earlier this year was not the start of a new tightening cycle, the central bank surprised global investors last month when it boosted borrowing costs by 50 basis points to 4.75%, which is good for the country’s highest interest rate since 2009.
However, some investors believe Mexican stocks still offer value, particularly for investors willing to be patient with EWW.
“The central bank will hold its first $1 billion auction of non-deliverable forward contracts on Monday, offering a way for businesses with expenses in dollars but revenue in local currency to hedge against further declines in the peso. Fitch Ratings has said companies including America Movil SAB and TV Azteca SAB are among the most vulnerable to a weaker peso as their overseas debt gets more expensive in local-currency terms,” reports Isabella Cota for Bloomberg.
Investors who believe the Mexican peso may continue to depreciate but anticipate the markets will improve can look to currency-hedged ETF strategies to diminish the currency risks. For instance, the Deutsche X-trackers MSCI Mexico Hedged Equity Fund (NYSEArca: DBMX) and the recently launched iShares Currency Hedged MSCI Mexico (NYSEArca: HEWW) provide exposure to the Mexico’s market without the added currency risk of a depreciating peso currency.
The peso is an important part of the Mexico investment thesis because exports account for over a third of GDP in Latin America’s second-largest economy. So are oil prices because Mexico is one of the largest non-OPEC producers in Latin America.
The peso is “trading near the average price of the past 200 days — a technical indicator that, when breached, may indicate more gains. Trading volume is lower than average ahead of the auction, according to traders,” reports Bloomberg.
March 6, 2017 at 10:29 am
A border tax floated by aides to U.S. President Donald Trump is “not a good idea” for bilateral energy trade, a senior Mexican official said on Wednesday, also confirming that Mexico’s second-ever deepwater oil auction would happen this year.
A 20 percent border tax on Mexican imports to the United States has been pitched by the Trump administration as one way to force Mexico to pay for a new border wall, a top campaign promise.
Separately, a so-called border adjustment tax has been proposed by the new administration and its Republican allies in Congress that in theory would tax imports but not exports.
Both proposed taxes face opposition from U.S. oil refiners and automakers, among other sectors, warning they would raise consumer prices.
“We don’t see this kind of a tax as a good idea,” said Aldo Flores, Mexico’s deputy energy minister for hydrocarbons.
“Our position continues to be that free trade and the free flow of these goods has benefited both countries, strengthening the energy security of both,” he said.
Relations between the United States and Mexico are especially tense as Trump has threatened to upend nearly a quarter century of free trade, deport millions of illegal immigrants and build his signature border wall while getting Mexico to pay it, something the Mexican government has said it will not do.
For decades, the two neighbors have nurtured a robust cross-border energy trade, with crude oil produced by state company Pemex sold to U.S. refiners, while American producers sell natural gas and fuels like gasoline and diesel to Mexican buyers.
Last year, the total value of U.S. energy exports to Mexico totaled $20.2 billion, while Mexico exported mostly crude oil worth $8.7 billion to the United States, in a reversal of the historic balance of energy trade between the two countries, according to U.S. Energy Information Administration data.
Similarly, Mexico’s crude shipments could be pressured if the United States approves the new Trump-backed permit for TransCanada’s (TRP.TO) proposed Keystone XL pipeline and the project brings new supplies of Canadian heavy crude to U.S. refineries.
“Supposing that (the pipeline) is completed, that changes the competitive playing field for Mexican crude,” said Flores, adding that producers of oil in Mexico would have to be more creative in how they market their output.
DEEPWATER AUCTION
Mexican and Canadian heavy crudes have competed for years for buyers among U.S. Gulf coast refineries.
While Mexico’s oil regulator is planning three new oil auctions later this year, covering shallow water and onshore fields, a new deepwater auction is also planned.
“It will be toward the end of the year,” said Flores, who also sits on the Pemex board and took over as deputy energy minister in August.
He declined to specify where the deepwater blocks would be located.
Flores added that a first-ever auction of shale oil and gas blocks would “probably” be scheduled, noting that necessary regulations would be published before the end of the year.
Last year, Mexico concluded four first-ever oil auctions, part of a landmark energy opening finalized in 2014 that ended Pemex’s decades-long monopoly, including a December deepwater auction that awarded 10 blocks to a wide range of international oil majors.
While Mexican crude output has declined over the past dozen years from a peak of 3.4 million barrels per day, Flores said he expected output to total 1.9 million to 2.0 million bpd in 2018, similar to a forecast of 1.94 million bpd for this year.
David Alire Garcia and Adriana Barrera / Reuters
Wed Feb 15, 2017 | 8:09pm EST
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