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ING Say AMLO's 'New Nationalisation' Shouldn't Be A Peso Negative

MEXICO
  • Now that markets have concluded that the Mexican peso is justified as being one of the best currencies in the world, the peso is selling off. Driving this correction looks to be a corporate finance deal announced this week that the Mexican government is buying 75% of the Mexican gas and wind facilities from Spain's Iberdola in a deal worth nearly US$6bn.
  • President AMLO describes this as a 'new nationalisation' – although that term may not be as scary for investors as it sounds. It seems this move is consistent with Mexico's policy of securing strategic reserves in the resource sector – e.g. recent moves to secure lithium deposits for the nation.
  • ING do not read the deal as negative for Mexico's potential to attract nearshoring FDI inflows and suspect that there will be very good demand for the peso should USD/MXN correct to the 18.50-19.00 region.
  • They see the potential for USD/MXN to trade to 17.50 and even 17.00 later this year.
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