20180221-法国巴黎银行-LATIN_AMERICA_STRATEGY__Mexico__The_dichotomy_between_locals_and_foreigners_12页_539kb

Summary of LATIN AMERICA STRATEGY Document

Core Content

This document provides an analysis of the investment landscape in Mexico, focusing on the exposure of non-residents and pension funds in the country's public debt and fixed income markets. It outlines key trends in bond holdings, equity allocations, and the impact of inflation and market conditions on investment behavior.

Key Points

Non-Resident Holdings in Mexican Public Debt

• Non-resident holdings of Mexican public debt remained unchanged at USD 113.6bn in January 2018.
• Non-residents account for 66% of international reserves, which total USD 173bn.
• Their share of the market has been relatively stable over recent years.
• Non-residents predominantly hold Mbonos (nominal rate bonds), with their exposure in UDlbonos (real rate bonds) remaining flat.
• Nov-42 bonds represent the largest portion of non-resident holdings, accounting for 17.2% of total exposure.
• Non-resident exposure in nominal rates has decreased since October 2017, but has remained stable in the Mbono space.
• Their average duration in Mbonos is around 5 years, while in UDIbonos it is 7.9 years.

Pension Fund (Siefores) Exposure

• Mexican pension funds increased their month-on-month exposure in real rates to DV01 USD 31.6mn by the end of January 2018.
• Their portfolio in nominal and real rates increased by 3% and 18% respectively on a monthly and yearly basis.
• Pension funds' equity holdings remained flat, while their fixed income holdings increased by 18% compared to the previous year.
• UDlbonos now make up 23% of Siefores' fixed income allocation, with a 3% increase in January.
• Mbonos increased by 3% (MXN 11bn) in January, but have decreased in value over the last 12 months by MXN 53bn.
• Cetes (Mexican Federal Treasury Certificates) holdings increased by 60% year-on-year.
• Reportos (securities issued by Mexican banks) increased by 40% in January.
• International bonds increased by 66% in January, while UMS global bonds decreased by 26%.
• Siefores have shifted from nominal to real rates in response to the sharp increase in inflation.
• Their average duration in nominal rate bonds has fallen to 7.4 years.
• They maintain an average duration of about 8 years in real rate bonds and have rebalanced their portfolios to keep this constant.

Investment Trends and Market Shares

• UDlbonos account for 50.6% of the total UDIbono market and are the largest holding of pension funds.
• Mexican pension funds (Afores) have total assets under management (AUM) of MXN 3,213bn (USD 173bn) in January 2018.
• Equity allocation increased to 23% of AUM, with foreign equities making up 17% of the total.
• Domestic public debt represented 6,464bn MXN or 0% of total holdings in February 2018.
• Pension funds held 1,413bn MXN or 21.9% of total public debt in February 2018.
• Local funds and insurance companies have lower market shares, with local funds at 11.6% and insurance companies at 5.7%.
• Banxico holdings have decreased slightly, while commercial banks and others show varied changes in their holdings.

Main Views

• Non-residents are major holders of Mexican public debt, with a stable share of the market and a consistent duration profile.
• Pension funds have been increasing their exposure in real rate bonds, particularly UDlbonos, as a response to inflationary pressures.
• The shift in portfolio allocation by pension funds from nominal to real rates is notable and reflects market conditions.
• The equity allocation of pension funds has increased, though fixed income remains the largest component of their portfolio.
• The distribution of holdings across the yield curve has shown significant changes, with non-residents increasing their exposure at the long end of the curve.

Important Information

• The document is non-independent research and is intended for Professional Clients and Eligible Counterparties.
• It may contain "Research" as defined under MiFID II unbundling rules.
• It does not constitute investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
• Conflicts of interest may exist due to the interaction between the Strategist and Economist teams and sales and trading.
• Steer™ is a trade mark of BNP Paribas.
• The information and opinions are subject to change and not intended to provide the sole basis for any evaluation or investment decision.
• Performance data may be based on back-testing and is not indicative of future results.
• The document is for informational purposes only and not for public offering or advertising.

Legal Notice

• The document is confidential and not to be copied or distributed without prior written consent.
• BNPP does not accept liability for any loss arising from the use of the document.
• It may contain performance data and simulations that are not guaranteed to reflect actual market conditions.
• The information is not guaranteed to be accurate or complete, and is based on public sources.
• BNPP may have financial interests in the issuers or entities mentioned and may engage in transactions inconsistent with the views expressed.
• Options and ETFs discussed are complex instruments and may involve high risk.
• Important disclosures regarding options and ETFs are provided, emphasizing the need for independent advice and the potential for conflicts of interest.

Conclusion

The document highlights the shift in investment behavior among Mexican pension funds and non-residents, with real rate bonds becoming increasingly attractive. It underscores the importance of understanding market dynamics and investment risks, and provides key insights into bond holdings, equity allocation, and market trends in Mexico.