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Emerging Market Insight

Yesterday, the Financial Times reported the dumping of Mexican assets in February, impacting foreign holdings by a 3.5% reduction. This resulted in an outflow of nearly $159bn pesos. While Mexico was seen as a favourable market at the beginning of the year, fund managers are moving funds to more liquid investments, meaning most of the sell-off came in fixed rate instruments.

This was in line with emerging economies in general, which is prompting international organizations to provide emergency loans to shore up their economies and avert disaster. The good news is that these institutions are relaxing their qualification criteria to expedite this support.

As we commented yesterday, while we expect to see further support for these markets, including domestic interest rate reductions, we also anticipate a bounce back in these economies when the pandemic abates.

One final note of optimism, while US banks are making large scale provisions for loan losses in their quarterly reporting, they did tell us that the initial rush to draw down on credit lines in March is not being repeated so far this month, hinting of some stability creeping in.

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