Mexican assets plummeted on Monday after Claudia Sheinbaum took office with a strong majority in Congress, raising fears among traders that the new administration could pass anti-market reforms, according to Bloomberg.
Despite polls predicting Sheinbaum's comfortable lead, investors were shocked by the Morena party's decisive wins in both congressional houses.
The Mexican peso fell as much as 4% against the US dollar before recovering some losses, while dollar bonds declined across the curve.
Sheinbaum's landslide victory marks her as Mexico's first female president, as reported by VCPost.
Who is Claudia Sheinbaum in Mexico?
Claudia Sheinbaum is not just a seasoned politician in Mexico; she's also a climate scientist. Given her experience, investors are concerned she may implement policies that favor fossil fuels, deterring investment in companies that do not align with such policies.
Investors are closely monitoring her selections for the economic team and her strategies to address Mexico's large fiscal deficit and the debt of state-owned oil company Petroleos Mexicanos SA.
Gordian Kemen of Standard Chartered Bank suggests that Claudia Sheinbaum's win may impact Mexico's future in a good way, given the peso's vulnerability and heavy long positioning, which make the currency prone to fluctuations.
However, Bret Rosen from EMSO Asset Management and Brad Bechtel from Jefferies in New York are anxious over Sheinbaum's administration and potential policy changes. They, and other investors, will be closely watching her cabinet picks, especially the finance minister and the forthcoming 2025 budget.
Despite these concerns, some analysts, like Marco Oviedo of XP, believe the peso could stabilize at around 18 per dollar in the coming days.
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