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NEW YORK (Reuters) – Andres Manuel Lopez Obrador won Sunday's Presidential Election, analysts say, on expectations he will be governed by an unbalanced race. .
Lopez Obrador, to form Mexico City mayor, holds about 20-point lead over his nearest rival ahead of the 1 July 1 vote, according to the latest polls, putting him on track to become the first leftist Mexican president since the 1930s.
Strategists at Miami-based Bulltick Capital, however, are among those who believe that Lopez Obrador will pursue centrist policies once in office.
When the peso went above 20 to the US dollar "we went on a long time ago, we were in the US "Bulltick said in a note to customers, citing the acronym used to refer to Lopez Obrador.
The peso MXN = D2 had lost as much as 16 percent versus the US dollar over the last 12 months, mainly due to the tensions between Washington and Mexico City.
The currency is up roughly 6 percent from the 2018 low of 20.88 to the dollar it hits this month.
Mexico is one of the world's fastest-growing companies, and is one of the largest investors in the country. Moody's said in a report this week.
Fitch Ratings said the country's financial crisis was more than just a problem.
"Broad geographical diversification of operations and strong capital structures are expected to be mitigated by the credit risk, resulting in only modest changes during the next 12 months," Alberto Moreno, Senior Director at Fitch, said in a statement .
Mexican debt has traded in a relatively tight range to U.S. benchmarks. JPMorgan Emerging Markets Benchmark Index Plus (EMBI +) .JPMEPMEX were at 209 basis points on corresponding U.S. Treasuries on Friday, not far from the average of 189 basis points over the last year.
The world's first ever IPC stock index is on track to post its largest monthly increase .MXX in over three years but is still down near 4 percent for the year, as is the US-traded MSCI Mexico ETF ( EWW.P ).
Options data suggest traders are moderately defensive on the peso and the U.S.-listed iShares MSCI Mexico Capped ETF ( EWW.P ).
Lopez Obrador's early and sustained lead in the polls is hardly the reason why Mexican assets have felt pressure.
The unexpected strength of the U.S. dollar, bolstered by rising U.S. interest rates, has undercut emerging market currencies. Investors have furthered the situation in the United States of America.
Lopez Obrador, who heads up the Morena party, has been in charge of social and environmental issues private and foreign investors.
Some members of Lopez Obrador's team have said that they will not govern the position of a leader in the fight against the NAFTA deal with the United States and Canada.
'RELAXED VICTORY'
Citi analysts said they were expected to rally in the peso as hedges unwind, as they have in past elections, "though concerns over AMLO's administration and NAFTA should return to the medium term." [19659004TheWallStreetbank'sbase-casescenariocallsfora"relaxedvictory"forLopezObradorandhispartybecomingthelargestpartyinbothchambersofCongresswiththepossibilityitwillbemajoritycontrol
In a strategy note, Commerzbank said the extent of Morena's dominance in Congress was now the biggest issue.
"Commerzbank analyst Alexandra Bechtel wrote" Should the president no longer be limited by an opposition-dominated Senate, nervousness over excessive spending by the new government. "
"It remains to be seen how (Lopez Obrador's) plans will actually be implemented."
Some investors are also betting likes of Walmart of Mexico City ( WALMEX.MX ) going strong. The stock is up 9 percent in the year-to-date period.
"The average consumer is still going to buy at Walmart," said Rishikesh Patel, London-based portfolio manager of the BMO LGM Emerging Markets Fund.
Patel said: "If you feel less optimistic, you look for places that give you more value for your money."
Reporting by Rodrigo Campos ; Editing by Daniel Bases and Paul Simao
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