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Foreign investors reduced holdings in Mexican corporate bonds

Foreign investors reduced holdings in Mexican corporate bonds

Posted by Ricardo Vázquez on November 25, 2014

Foreign investors trimmed their holdings of Mexican corporate securities in the third quarter and sharply slowed their purchase of government debt due to worries about global growth and uncertainty over central bank policy in advanced economies, the central bank said on Tuesday.

As Mexican stocks rose through the quarter to a record high in September, investors pulled $658 million out of Mexican companies' shares and debt compared with an inflow of $6.3 billion in the second quarter, it said.

Flows into peso-denominated government debt fell to nearly $2.4 billion in the third quarter from $7.2 billion in the second.

Huge inflows into emerging markets in recent years are expected to recede back to developed economies when the U.S. Federal Reserve is perceived to move closer to raising interest rates. Economists expected the Fed's near-zero benchmark rate to climb by mid-2015, according to a Reuters poll..

The central bank statement noted that "worries about the outlook for the global economy and uncertainty about the possible response of monetary policy in advanced economies" hit emerging market assets around the world in the third quarter.

The peso has continued to weaken since the third quarter, slumping to a 2-1/2 year low in November.

Mexico's current account deficit narrowed to $2.702 billion in the third quarter. For first nine months the deficit was the equivalent of 2.0 percent of gross domestic product, the central bank said. (1 US dollar = 13.6330 Mexican peso).

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