Overview of Mexico’s Financial Markets in H1
Mexico’s financial markets have predominantly witnessed outflows of foreign capital during the first half of 2023, resulting from portfolio reallocation by fund managers amidst a period marked by trade uncertainty. This uncertainty continues into the second half of the year.
June Outflows and H1 Accumulation
In June, foreign investors withdrew $1,081.5 million from the Mexican equity market, marking the fifth consecutive month of capital outflow. For H1, Mexico’s stock market accumulated a total outflow of $4,144.2 million, the highest since 2013 when $6,399.9 million left the market.
Net Capital Inflow Despite Outflows
Despite these outflows, the Mexican stock market’s net capital inflow reached $157,734.1 million, the highest level in a year.
Performance of Mexican Equity Indices
The lower foreign capital participation in the Mexican equity market occurred as the two primary indices, S&P/BMV IPC and FTSE-BIVA, advanced 16% and 15.4%, respectively, in H1. The S&P/BMV IPC’s performance surpassed any other first half in the past 18 years.
Reasons for Capital Outflow
This strong performance can be attributed to the diversification of investments beyond the US market. Some experts suggest that capital outflow is part of a strategy to take profits, given the ongoing trade uncertainty.
Expert Insights
Humberto Calzada, Chief Economist at Rankia Latin America:
“We’ve had a positive year for the BMV, but one factor for capital outflow could be profit-taking and uncertainty surrounding tariff implementation. Investors remain unconvinced about a favorable US-Mexico trade relationship.”
Capital Flow Distribution in June
Foreign capital flows into equities totaled $9,900 million in June, slightly up from $8,100 million in May, according to the International Finance Institute.
Regional Distribution of Capital Inflows
Asian emerging markets absorbed the majority of these inflows, with $6,900 million, driven by increased demand for technology and manufacturing exposure as well as inflation stabilization signals. Latin America attracted $2,400 million, while European emerging markets saw $1,700 million in capital inflows during June.
Key Questions and Answers
- Q: What has been the trend in foreign capital inflows to Mexico’s stock market in H1 2023?
A: Mexico’s stock market has experienced predominantly outflows of foreign capital during H1 2023, with June seeing $1,081.5 million withdrawn from the market.
- Q: How does Mexico’s H1 capital outflow compare to previous years?
A: The $4,144.2 million outflow in H1 2023 is the highest since $6,399.9 million left the market in H1 2013.
- Q: What is the net capital inflow into Mexico’s stock market despite outflows?
A: The net capital inflow into Mexico’s stock market reached $157,734.1 million, the highest level in a year.
- Q: How have Mexico’s equity indices performed in H1 2023?
A: Both the S&P/BMV IPC and FTSE-BIVA indices advanced 16% and 15.4%, respectively, in H1, with the S&P/BMV IPC outperforming any other first half in the past 18 years.
- Q: What factors contribute to the capital outflow from Mexico’s stock market?
A: Experts suggest that capital outflow is partly due to profit-taking and uncertainty surrounding tariff implementation, as investors remain unconvinced about a favorable US-Mexico trade relationship.
