December 31, 2018 / 4:35 PM / 6 months ago

Mexican stocks on track for worst quarter in 17 years

MEXICO CITY, Dec 31 (Reuters) - The Mexican stock exchange was on track on Monday to post its worst quarter in over 17 years, dragged down by doubts about how the new leftist government will manage the economy as well as concerns over global growth and trade.

Mexico’s S&P/BMV IPC stock index has declined over 16 percent in the present quarter, its steepest drop for a three-month period since the third quarter of 2001, when the Sept. 11 terrorist attacks hit the United States.

That quarter the market fell by nearly 19 percent.

Before taking office this month, President Andres Manuel Lopez Obrador rattled financial markets when on Oct. 29 he said he would scrap a part-built $13 billion new Mexico City airport on the basis of a straw poll that was widely criticized.

The decision kicked off a dispute with some bondholders of debt issued to finance the airport, and raised fears Lopez Obrador could pursue an agenda characterized by arbitrary decision-making and frequent use of referendums.

Market sentiment was also hammered by a bill drafted by Lopez Obrador’s National Regeneration Movement to limit bank fees and another to regulate the mining sector.

“Those decisions were not well received and the unease has persisted among investors,” said James Salazar, economist at CI Banco.

At just after 10:00 a.m. local time on Monday (1600 GMT), the Mexican index was trading flat at around 41,460 points.

To avoid the distinction of being the worst quarter in 17 years, it would need to close up by more than 1 percent. Amid the global financial crisis of the third quarter of 2008, the index fell 15.3 percent.

Global markets have been depressed this year by U.S. President Donald Trump’s trade disputes with China, uncertainty surrounding Britain’s planned departure from the European Union and more recently the U.S. federal government shutdown.

Mirroring falls in other major stock exchanges, Mexico’s main index is set to suffer its worst annual performance in 10 years, declining by more than 15 percent in 2018.

Still, the index has steadied in the last few weeks, having fallen well below 40,000 points in late November.

The market will likely continue to move “laterally” during the first half of 2019 until it becomes clearer how Lopez Obrador is managing public finances, said Jorge Placido, an analyst at brokerage Vector Casa de Bolsa.

“Investors are willing to pay and stick around until there is more clarity about the economy,” said Placido. (Reporting by Sheky Espejo Additional reporting by Miguel Angel Gutierrez Writing by Anthony Esposito; Editing by Dave Graham and Alistair Bell)

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