20180822-法国巴黎银行-Mexico__Pattern_reverses_from_equity_to_fixed_income_12页_495kb

Summary of LATIN AMERICA STRATEGY Document

Core Content

This document provides an analysis of the investment behavior of non-residents and Mexican pension funds (Afores) in the context of Mexico's public debt market. It highlights changes in exposure across different types of bonds, including nominal rate bonds (Mbonos) and real rate bonds (UDIBonos), as well as the broader implications of these shifts for the financial landscape in Mexico.

Main Views and Key Information

Non-Residents' Holdings of Mexican Public Debt

• Decrease in Holdings: Non-residents' holdings of Mexican public debt decreased by 0.3% month-to-month (m/m) from MXN 2.15trn (USD 116.3bn) in July.
• Exposure Increase: Despite the decrease in holdings, the exposure in nominal rates increased by 3% in USD terms or 0% in MXN terms (+USD 1.6mn DV01).
• Tenor Shift: The increase in exposure was mainly driven by a rise in short-term bonds, while long-term exposure decreased.
• International Reserves: Non-residents' holdings represent 67.13% of Mexico's international reserves (USD 173.2bn), slightly lower than one year ago (68.05%), but relatively stable over recent years.
• Bond Type Breakdown:
  • Mbonos: Non-residents hold 32.1% of total local debt.
  • UDIBonos: Non-residents hold 3.5% of the UDIbono market.
• DV01 Exposure:
  • Nov-42 remains the largest bond in terms of non-residents' exposure, accounting for 17.1% of total exposure and currently at USD 9mn DV01.
  • Exposure to longer tenors has increased, now representing 51.3% of total non-residents' exposure.
  • Medium-term exposure is at 33.7% of total non-residents' exposure.

Mexican Pension Funds (Afores)

• Total Assets Under Management (AUM): AUM for Afores increased to MXN 3,368bn (USD 180bn) in June 2018, up 4.8% quarter-over-quarter (q/q).
• Inflows and Profits: Inflows were MXN 24.6bn, and profits from asset appreciation were estimated at MXN 21bn.
• Portfolio Shift:
  • Afores have been shifting from equity to fixed income since the end of 2016.
  • This pattern has now reversed, with a notable increase in fixed income allocation and a decrease in equity.
• Fixed Income Breakdown:
  • Mbonos: Increased by 7% q/q (USD 1.5bn).
  • UDIBonos: Increased by 6% q/q (USD 2.4bn).
• Equity Allocation:
  • Domestic Equities: Increased by 20% q/q (USD 2.3bn).
  • Foreign Equities: Decreased by 9% q/q (USD 2.4bn).
• Equity Share History: Afores' equity share peaked at 25.6% between 2009 and 2013, then declined, and is now showing a reversal in trend.
• Average Duration:
  • Nominal Rate Bonds: Pension funds' average duration has grown to 7.7 years.
  • Real Rate Bonds: Pension funds have been reducing their average duration since early 2018.

Key Charts and Tables

• Table 1: Provides a breakdown of local public debt by investor type, including changes in holdings and percentages.
• Charts 1-4: Illustrate the distribution of holdings among different investor categories.
• Charts 5-6: Show the share of non-residents in Mexican local debt and the trend over time.
• Charts 7-10: Highlight the investor share in different bond types.
• Charts 11-13: Break down non-residents' DV01 exposure across the yield curve.
• Charts 14-15: Display the breakdown of non-residents' exposure by maturity.
• Charts 16-19: Show the average duration of non-residents and pension funds in both nominal and real rate bonds.
• Charts 20-22: Illustrate the changes in pension funds' exposure to Mbonos and UDIbonos.
• Charts 23-24: Present the breakdown of pension fund holdings by asset class.
• Charts 25-26: Show the allocation of pension funds to equities and fixed income.

Conclusion

The document outlines a notable shift in investment behavior, with non-residents increasing their exposure to shorter tenors and pension funds showing a reversal in their portfolio trend from equity to fixed income. These changes are influenced by inflation dynamics and market conditions, and the analysis emphasizes the importance of duration and risk metrics like DV01 in understanding the implications of these shifts.