The seven-year bull run in Mexican stocks may be coming to an end.
Strategists and investors are tempering their expectations as corporate profits slide, economic growth slows and the U.S. presidential election rattles investors. UBS AG expects a 10 percent drop in the IPC index by the end of the year. BTG Pactual cut its recommendation on Mexican stocks to underweight last week. Barclays Plc says valuations are bound to fall. This month, Mexico’s biggest stock ETF has seen the largest withdrawals in two years.
The increasingly bearish sentiment is closely tied to a rout in the peso that has made it the worst performing major currency amid prospects that Donald Trump will win the U.S. presidential election and make good on pledges to renegotiate trade accords. While the peso has recovered from record lows, international investors have been hit hard in recent weeks. The IPC index has fallen 3.4 percent in dollar terms since the Republican convention, compared with a 5 percent gain in the MSCI Emerging Markets stock index.