Betting On US Election Via The ‘Trump ETF’

October 04, 2016

Peso’s Decline At Heart Of Matter

Much of the negative performance has been driven by the decline of the peso since last month, which hurt returns for U.S.-dollar investors even when Mexican stocks hold their value.

"There's no reason for the peso to go from 18.20 to 19.50 (per dollar) unless it's because Trump has gone from being behind to being dead even with Hillary," David Garff, president of Accuvest Global Advisors, which sold its last share of the fund in May, said in a phone interview.

Mexico's central bank chief Agustin Carstens said on Friday that "it was a reality" that there was a correlation between his country's weakening currency and the Trump campaign.

"I can't deny there's a knee-jerk reaction by the peso when it was perceived (Trump) did badly in the debate," said Win Thin, global head of emerging market currency strategy at financial services firm Brown Brothers Harriman in New York. "But the peso's been weakening for several years even before Trump became the nominee."

More Than Trump Hurting Peso

"The media has been playing this up a bit, but Mexico’s already suffering from low oil prices, sluggish growth," Thin added. "The peso is often used as a proxy for the wider emerging markets, so there’s all these other factors that to me are more important to determining the peso exchange rather than Trump.”

Even if the peso's decline has already come to an end, Accuvest's Garff said Mexican stocks held by the ETF could still be in for pain under a Trump presidency.

Four-fifths of Mexico's exports go to the United States, and Garff said Mexican manufacturers could suffer if the United States forces its NAFTA partners to renegotiate the treaty.

Central bank chief Carstens, speaking on local radio, said a Trump victory would hit his country like a hurricane, adding that the scenario for Mexico was better with a Clinton win.

"If Trump does try to blow up NAFTA, it will hurt Mexico. No question," said Garff. "It is a double whammy."

 

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