As expectations of an impending recession rise, the Mexican fixed income market it is placed as an investment option with moderate risk, explained José Luis Ortega, director of the Debt and Multi-Asset teams at BlackRock Mexico.
“At this moment when you have uncertainty about the economic cycle about how much the different economies can slow down, due to the violent rate hikes by central banks in recent months, an option with a very moderate risk that seems to us attractive is the debt market”, he commented.
In an interview, he added that this moment is combined with a historical cycle of high double-digit interest rates not seen in more than 15 years in Mexico, which reaches levels of 11.25% and it is not ruled out that it could escalate, in the next meeting of monetary policy of the Bank of Mexico (Banxico) to 11.50 percent.
The specialist stressed that this rate level in Mexico can still aspire to have significant returns and, above all, thinking about the next 12 months, inflation is expected to be between 4 and 5 percent. “This tells us that if you invest in fixed income you get a real rate of return of approximately 6 percentage points,” said José Luis Ortega.
He even said that in his scenario during this 2023 and throughout 2024 inflation is expected to remain at levels of 5%, and although Bank of Mexico it will lower its reference rate towards the end of this year and next, it will not have as much room to reduce it to levels of 4% because inflation will continue to be a problem.
Then, the interviewee was repetitive when commenting that “there will still be several months in which people can continue to take advantage of these high levels of rates, investing in fixed income instruments.”
“The debt market has been with low volatility, we continue to see foreigners who have become interested in the Mexican market again because they still like fiscal discipline very much, we have an independent Bank of Mexico that allows us to continue making very disciplined decisions, on everything, the high levels of interest rates, the low volatility and the low risk”, he considered.
The Mexican Stock Market is attractive
For the director of the Debt and Multi-Asset teams at BlackRock Mexico, the Mexican Stock Market is also attractive. In 2023 it has generated a return of 12.80 percent.
“The Mexican stock market has been one of the best stock markets so far this year, it continues to have attractive valuations. As a global company, I see a lot of interest in investing in the variable income part and in the Mexican debt market, mainly you see this whole issue of “nearshoring” and “friend-shoring“As one of the spearheads so that our market continues to have good traction and can give good returns,” he said.
Then he assured that they have increased their exposure to Mexican equities because “it is well positioned to generate good returns, but it implies facing more risks than the fixed income market,” he emphasized.
In general, he continued, there are very dynamic sectors, such as fibers and airports.
“In general, we like the Mexican Stock Market, we see it as quite attractive with interesting sectors and we like the issue of diversification, we do not bet on a particular company or sector. We always recommend diversifying portfolios to have better performance with the lowest possible risk level”, suggested the BlackRock specialist.
