We will have a second consecutive year of capital outflows, which cannot be classified as leakage. They were a portfolio adjustment where investors unwound positions where they had the most to take China securities, explained the Director of the Financial Visor consultancy, Joel Martínez. In a single day, on December 20, they entered 20,000 million pesos.
In the first three weeks of December, the settlement of Mexican debt securities was stopped and an inflow of 41,577.92 million pesos was even observed, shows information from the Bank of Mexico.
World portfolios are looking for returns and among emerging markets Mexico stands out because it does not present important structural problems like those that Brazil, Colombia, Peru or Chile do, explained Joel Martínez, director of the consultancy Visor Financiero.
In addition, he highlighted that the rate differential offered by Mexico continues to be attractive in a world that yields returns very close to zero.
Only on December 20, the holding of government securities in the hands of foreigners took a leap with the arrival of 20,000 million pesos, emphasized the director of economic and financial analysis of Banco Base, Gabriela Siller.
These are very volatile capital, he argued. But even with a positive inflow during the last week of 2021, it is unlikely to have the strength to reverse the significant capital outflows of the previous months. The divestment of all of 2021 will be less than that of 2020.
Figures from the Bank of Mexico show that between the first business day of 2021 and December 23, the liquidation of capital amounted to 245,183 million pesos.
To get an idea of the persistent volatility in foreign capital, it is enough to remember that exactly one month before, at the cut-off of November 25, the settlement of Mexican debt securities reached a peak of 294.928 million pesos.
Possession of foreigners in Mexico
On average, 2021 will be the second in a row in which foreigners undo positions in Mexico, but it cannot be classified as a capital flight, Martínez emphasized.
In 2020, a historical capital liquidation of 259,325 million pesos was observed.
At that time, foreigners liquidated their positions from all sides, although in November 2020 an entry to M Bonds was presented, which made him assume that the return would take place.
It was also in November 2020 when they announced that China’s bonds would enter the global sovereign bond index, which is a benchmark benchmark for many global portfolios.
China is an important market and to take its bonds, investors had to ditch the ones they had in other emerging markets. And Mexico is one of the countries where there is more possession of foreigners. It was clear that they would get rid of Mexican titles to take the Chinese.
Information from Banco de México shows that non-resident investors sold their positions in Mexican government securities and were left with 18% of the total outstanding as of mid-December. This proportion contrasts with the 22.32% they had at the beginning of the year.
The strategist explains that this portfolio adjustment to take Chinese securities will not be much longer because, unlike Mexico, its central bank is not autonomous.
Capitals do not go to temporary decisions, nor do they respond to political phobias, he said.
Foreigners are looking for returns and since there is no such in developed countries, it is very likely that they will return sometime in 2022, he emphasized.
Every portfolio seeks returns; it is not handled by subjectivity nor does it respond to occurrences. It operates based on differentials that make the market more attractive, as in the case of Mexico, due to its balance of payments, which is not bad.
The expert ruled out that cryptocurrencies are an alternative.