EM (Strate)gist gets to the gist of Emerging Markets FX, Bonds, Economics, Politics and Global Macro.

  • LinkedIn Social Icon

An online resource dedicated to news, information and insight for EM and Global macro investors.

  • Intro

  • Calendar

  • Strategist's Notebook

    • EM Asia-Pac
    • DM Asia-Pac
    • Australia NZ
    • EM EMEA
    • DM EMEA (Europe)
    • EM Americas (LatAm)
    • USA Canada
    • Commodities
  • Signals Project

    • Equities
    • FX
    • Fixed Income
    • EM Credit
  • Reference

    • Shortcuts
  • Investment Principles

  • More

    Use tab to navigate through the menu items.
    To see this working, head to your live site.
    • All Posts
    • My Posts
    EMgist_admin
    Nov 23, 2017

    Mexico: High CPI + Poor retails = point to mild stagflation

    in EMgist Live

    Mexico Bi-weekly CPI +0.92% in 1st half of Nov.; Est. +0.75%


    Today's weaker-than-expected retail sales and above-consensus CPI (both headline and core) point to/reinforces the stagflationary scenario that would complicate central banking:


    Mild stagflation would be more negative Mexican equities than it is for the MXN. Banxico policy should stay tight (front-end TIIE swap rates are even pricing in some risk of a rate hike), which should keep MXN supported. MXN is in fact stronger on the day, helped by hawkish words from the Banxico Minutes (from 9 Nov MPC) as well as from the outgoing Governor Carsten who leaves next week (no permanent replacement named as yet):

    • *CARSTENS: BANXICO SHOULDN'T LOWER ITS GUARD AGAINST INFLATION

    • *BANXICO MAJORITY SAID MEXICO MAY FACE MORE CPI PRESSURES


    In contrast, Mexican stocks (Bloomberg ticker = Mexbol; ETF = EWW) are vulnerable not only to prolonged tight monetary policy, but also from possibly intensifying downside risks to growth - not just from challenging NAFTA negotiations and a contentious presidential election (Jul-18) - but also now from evidently weaker consumption. Domestic demand and consumption had been - for some time - a resilient pillar of the Mexican economy. But that too is showing signs of weakness as retail sales decelerate sharply from earlier this year:


    In asset markets, no surprise then to see strength in the MXN (green) while the Mexbol (red) has been depressed. The net is the stock ETF EWW (black) is flat over the past 1mth. Recommendation: Keep strategic short on EWW.


    0 comments
    0
    0 comments
    • Intro

    • Calendar

    • Strategist's Notebook

      • EM Asia-Pac
      • DM Asia-Pac
      • Australia NZ
      • EM EMEA
      • DM EMEA (Europe)
      • EM Americas (LatAm)
      • USA Canada
      • Commodities
    • Signals Project

      • Equities
      • FX
      • Fixed Income
      • EM Credit
    • Reference

      • Shortcuts
    • Investment Principles

    • More

      Use tab to navigate through the menu items.

      CONTACT US

      Email: strategist@emgist.com

      ​

      ​Disclaimer: All communication on EMgist.com is provided for information purposes only, it is general in nature and does not take into account the objectives, financial situation or needs of any person. You should consider whether it is appropriate for you and seek independent advice before acting on it. EMgist.com is not acting in an advisory or fiduciary capacity and all communication is not an offer or recommendation to buy or sell any product or enter into any transaction. EMgist.com does not guarantee the completeness or accuracy of any information presented on this site. You should do your own independent research before making any decisions.

      ​