The rise in rates, and the dollar exchange rate, between September 2016 and January 2017, caused outflows from Mexican debt funds. Investors made precautionary withdrawals to avoid additional losses, anticipating to greater volatility. Tenure decreased by 4.81%, to 72.93 billion pesos (mdp). Are more outflows expected?
Exits at National Currency Funds and Inflows in Foreign Currency ones
Five managers accounted for 77.8% of total outflows: Santander, BBVA Bancomer, Impulsora, Banorte-IXE and Interacciones. In percentage terms, the ones with the highest outflows were Monex, Interacciones, Multiva, CI Fondos and Santander. Despite the adversity, there were some managers that attracted inflows, such is the case of Franklin Templeton, Compass, Value and Sura. Finamex and BNP are excluded, given their percentage increases can be explained by their recent creation.
Of 275 funds, 177 showed outflows and 98 showed inflows.
Short-, medium- and long-term funds in local currency securities reduced their assets by 109,460 mdp, 7.22% of the sector’s absolute value as of September.
A total of 29 funds reduced its assets by more than 30%. In contrast, 26 funds increased them by more than 30%.
Eight funds decreased their AUM by more than 60%.
The resettlement meant unusual increases for a long list of funds, which excludes those of new creation and/or a different regime. AUM of 12 foreign currency funds grew more than 100%, while only a single national currency fund increased in that proportion.
Medium and Long Term Funds with the Biggest Outflows
The medium and long-term funds, in all their modalities (discretionary, governmental, indexed, etc.), were the most affected. Its inflows totaled 18,070 mdp and its outflows, 60,160 mdp, for a negative net variation of 42,090 mdp, 57.7% of the total reduction. Short-term funds, given their less vulnerable nature, reflected inflows of 46,900 mdp and outflows of 77,800 mdp, for a net negative flow of 30,800 mdp, 42% of the total.
In some cases, the resources were partially transferred to other funds of the same manager, regardless of their profile.
At BBVA, 22,510 mdp came out of BMERGOB and BMERPZO, while 7,730 mdp went to BBVADOLL and BMRGOBP.
In Santander, 9,380 mdp came out of STERGOB and ST & ER-7, while 6,020 mdp went to ST & ER-5.
In Banamex, 9,850 mdp came out of BNMDIN and BNMPZO, while 8,050 mdp went to BNMCOB + and BNMREAL.
In Banorte-Ixe, 6,606 mdp came out of NTEGUB and IXEMPM +, which were offset with inflows of 6,850 million pesos to IXEUSD, NTERTD and IXEDINT.
The only fund group with net growth (36,540 mdp, 120% of its value in September) was that of foreign currency instruments, in all its variants, but mainly in the short term sphere. The increase underlies the fear that the Mexican peso’s devaluation will intensify and the preference for cash to change strategies if conditions warrant so.
Regarding managers, the generalized negative flow reveals that the public took refuge in, for example, bank branches products, notes and foreign currencies in cash, as well as metals and real estate.
While the 10 years and longer bond rates did not evolve in January 2017 as they did in previous months, traders are worried and estimate that investors will remain expectant for at least two more months. As a result, some predict additional marginal outflows and estimate that, if volatility remains contained, assets could stabilize in April.
Column originally written in Spanish by Fitch Mexico’s Arturo Rueda