COVID-19 Takes a Toll on Global MarketsBy Gabriela Mastache | Fri, 03/13/2020 - 12:14
Global markets have had their worst week since 1987 after fears of COVID-19 spread across the world. Instability also led the Mexican peso to reach a historic minimum, while the Mexican Stock Exchange had to cease operations for 15 minutes on Thursday because of a sudden fall in its main indicators. Despite this, the Mexican banking sector assures banks remain solid, fully capitalized and ready for any type of contingency.
- The Dow Jones Index and the S&P 500 registered on Thursday their worst results since 1987. The Dow Jones fell 10 percent while S&P 500 registered a 9.5 percent fall. Both indexes have now entered a bear market, which means they have registered a fall of at least 20 percent since their last historic maximum. In an effort to revert the global trend, the US Federal Reserve announced a plan destined to alleviate what they call “temporary interruptions” of the markets. As part of these measures, the Fed announced repurchases of governmental bonds for the rest of the month.
- BMV has also experienced important missteps and on Thursday had to cease operations for 15 minutes after the IPC experienced a 9.18 percent fall in the morning. The last time the BMV had to stop operations was in 2015. This was the worst fall for the IPC since 1998.
- The BMV is not the only one suffering from COVID-19 fears. The Mexican peso registered its worst level against the US dollar, pressured by the global pandemic. The Mexican currency traded at up to MX$22.97 per dollar. Banco Base expects the US dollar to move in a range between MX$21.60 and MX$23. In light of this condition, Banxico and the SHCP announced an auction currency hedging of US$2 billion, which is expected to generate better liquidity conditions, better prices and an ordered functioning of the market. Both institutions left the door open for implementing any other action needed to ensure the correct functioning of markets.
- Though global markets and currencies have been impacted negatively in the past few days, Arturo Herrera, Minister of Finance, said at the 83th Banking Convention that the volatility we are experiencing should be taken with a “grain of salt.” Herrera also said that the late arrival of COVID-19 to the country allowed the government to take the needed preventive measures to contain the disease.
- Also at the Banking Convention, Luis Niño de Rivera, President of the ABM, stated that the Mexican banking sector is prepared for any type of contingency resulting from the COVID-19 outbreak. According to Niño de Rivera, the sector’s solidity provides banks with the strengthen to transit the current situation and any other type of contingency. While the Mexican economy might suffer from the current economic global panorama, he said the country has the opportunity to replace China in terms of trade with the US.