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RPT-UPDATE 2-Mexico FDI swells in Q2 but outflows hit stocks, bonds
August 23, 2013 / 4:49 PM / 4 years ago

RPT-UPDATE 2-Mexico FDI swells in Q2 but outflows hit stocks, bonds

MEXICO CITY, Aug 23 (Reuters) - Foreign direct investment in Mexico nearly quadrupled in the second quarter, thanks to the purchase of brewer Grupo Modelo, but financial investments suffered as investors yanked billions from the corporate debt and stock markets.

Foreign investment in Mexican stocks and corporate debt registered a negative $4.941 billion in the second quarter. That compared with a positive inflow of $29 million in the first quarter, central bank figures showed on Friday.

The withdrawals helped push total portfolio investment down to a negative $9 million, well below the $13.2 billion in net inflows during the prior three months.

By contrast, foreign direct investment (FDI) reached $18.29 billion in the April-June period, boosted by Belgian-based beer giant Anheuser-Busch InBev’s acquisition of Grupo Modelo, which went through at the end of May.

The FDI figure was nearly four times above the $5.56 billion recorded in the prior quarter.

The manufacturing sector, which has been struggling under weaker U.S. demand, received the bulk of the FDI in the first half.

Fears of a wind-down in Federal Reserve monetary stimulus - which could weaken the peso and boost import prices - has dampened investor interest in emerging market assets.

Optimism about President Enrique Pena Nieto’s reform agenda had bolstered investment in Mexico, but the government cut 2013 growth forecasts to 1.8 percent from 3.1 earlier this week, after data showed the economy contracted in the second quarter.

The fading interest was reflected in a sizeable decrease in investment in government debt. Flows into peso-denominated bonds reached $1.75 billion in the quarter, well below the $9.34 billion invested in the first quarter.

The data also showed Mexico’s current account deficit widened to $6.01 billion in the second quarter from 5.32 billion in the first, bringing the deficit to 1.8 percent of gross domestic product in the first half of this year .

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