Title: Impact of Currency Exchange Rates on Mexican Investors’ Equity Portfolios
Subtitle: The Superweight Eats Into the Gains of US Tech Stocks Traded in Mexican Pesos
Date: [Current Date]
Byline: [Author’s Name]
A financial confession by an investor highlights the challenges faced by Mexican investors who have invested in US tech stocks. The investor admits to being a conservative and low-emotion investor who believed in long-term growth and bet on the technology sector in the United States. However, the investor’s excitement from seeing the record-breaking performances of companies like Apple, Nvidia, and Microsoft is dampened when they realize that the returns in their portfolio, denominated in Mexican pesos, don’t match the stellar performances in US dollars.
The article reveals that the appreciation of the Mexican peso against the dollar has significantly affected the gains of Mexican investors in US stocks. According to historical data from Investing.com, the peso has already accumulated an appreciation of 19% in the last year. Last week alone, the peso closed with a 2.3% gain against the dollar, reaching its lowest level since December 7, 2015.
To further illustrate the impact of currency exchange rates, the article compares the performances of popular stocks in both Mexican pesos and US dollars. Apple, which has seen a gain of 29.2% in US dollars over the past year, only provides a 3.88% yield in Mexican pesos. Similarly, Nvidia’s nearly 200% return in US dollars is limited to 138% in Mexican pesos.
Even well-known companies like PepsiCo, which reported last week, showcase the discrepancy. While stocks have returned nearly 13% in US dollars, PepsiCo registers a decrease of almost 8% in Mexican pesos.
The Vanguard S&P 500 ETF, which tracks the performance of America’s 500 largest public companies, provides further evidence of the impact. In US dollars, the ETF has delivered a gain of 18.62% over the past year, but when traded in Mexican pesos on the Mexican Stock Exchange, it registers a loss of 3.15%.
The article suggests that the underperformance of portfolios with US shares traded in Mexican pesos is a result of the historical appreciation of the peso. The appreciation erodes a portion of the gains from securities traded in US dollars or accentuates losses. Additionally, the lower trading volume in the local market further affects the performance of international securities in Mexican pesos.
The article concludes by acknowledging that while much attention is given to the negative impact of exchange rates on recipients of remittances and exporting companies, Mexican investors in US securities listed on the SIC (International Quotation System) are also affected. The falling exchange rate prompts investors to moderate their euphoria and adjust their investment strategies.
In summary, Mexican investors in US tech stocks have witnessed a discrepancy between the stellar performances in US dollars and the modest returns in Mexican pesos. The appreciation of the peso and lower trading volumes in the local market have contributed to the underperformance. As the superweight takes a piece of the pie, Mexican investors are forced to rethink their expectations and adjust their investment strategies accordingly.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of [News Outlet].