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Mexico’s historic election

Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.

Mexicans voted in June to elect their first ever female president. While Claudia Sheinbaum, former mayor of Mexico City and current president AMLO's chosen successor, was widely expected to become president-elect, her margin of victory far surpassed the most recent polls. The fact  that her Morena party's coalition will have a two thirds majority in the Lower House of Congress also confounded expectations. With over 59% of the vote, more than 30 percentage points ahead of the next candidate and the largest margin in history, Sheinbaum has received a strong mandate from the Mexican population.

As the market digested this news, the Mexican equity market fell by 6% and the peso weakened a further 4%. Despite the widely held view that Sheinbaum is a technocrat, with a PhD in energy engineering, and far more pragmatic than the outgoing president Andrés Manuel López Obrador (AMLO), there is concern that with control of Congress many of the checks and balances that have kept AMLO from implementing some of his more radical policies will be materially weakened. Throughout the election campaign, Sheinbaum has talked about policy continuity as well as the positive reforms required for Mexico to take full advantage of the immense nearshoring opportunity therefore, it is the uncertainty that spooked the market rather than any specific policies that could negatively impact the economy or businesses.

Indeed, in her first speech after the election, Sheinbaum reiterated her commitment to policy continuity, fiscal prudence, central bank independence, and the need for more private and foreign investment. For months Sheinbaum has been engaging with the private sector in order to better understand the bottlenecks that could slow or deter investment in new manufacturing capacity. Her comments, along with the reappointment of respected finance minister Ramirez de la O, have allowed Mexican equities to recover the bulk of losses (now -1%) while the peso remains around 3% weaker than before the election.

The new Congress will take office in September and Sheinbaum becomes president in October. There will be ongoing uncertainty and speculation over this period as we wait for cabinet appointments and further details on which policies she will prioritise. However, Mexican equities have derated meaningfully over the past decade and especially during AMLO's six-year term as president. A healthy political risk premium is clearly embedded in valuations and a Sheinbaum presidency is likely to be far more constructive than her predecessor – both by addressing specific issues relating to nearshoring and expanding Mexico's manufacturing base, and in her relationship with the private sector more broadly.

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KEY RISKS

Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.

The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

Overseas investments may carry a higher currency risk. They are valued by reference to their local currency which may move up or down when compared to the currency of the Fund.
This Fund may have a concentrated portfolio, i.e. hold a limited number of investments. If one of these investments falls in value this can have a greater impact on the Fund's value than if it held a larger number of investments. The Fund may encounter liquidity constraints from time to time. The spread between the price you buy and sell shares will reflect the less liquid nature of the underlying holdings.
Investments in emerging markets may involve a higher element of risk due to less well-regulated markets and political and economic instability. This may result in higher volatility and larger drops in the value of the fund over the short term. Outside of normal conditions, the Fund may hold higher levels of cash which may be deposited with several credit counterparties (e.g. international banks). A credit risk arises should one or more of these counterparties be unable to return the deposited cash. Counterparty Risk: any derivative contract, including FX hedging, may be at risk if the counterparty fails.

DISCLAIMER

This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.

This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust.

Storm Uru
Storm Uru
Storm is a lead fund manager of the Liontrust Global Innovation, Liontrust Global Dividend and Liontrust Global Technology funds. He has 12 years industry experience, including as a fund manager and trader and prior to Liontrust worked at Neptune Investment Management running global funds and covering the global industrials sector. He holds an BBS in finance and MBS in international business from Massey University, an MBA from Oxford University and is a CFA Charterholder. He represented New Zealand in rowing at the 2008 and 2012 Olympic Games, winning bronze in London in 2012.

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