Mexico to benefit from rising cost of outsourcing: Thompson
Axa emerging markets manager tips Mexico to benefit from rising cost of outsourcing to China.
Mexico’s oil sector stands to benefit from a change of government and an overhaul of the country’s tax regime, according to Axa Investment Managers’ (Axa IM) Julian Thompson.
The Mexican electorate went to the polls yesterday (July 1), with the Institutional Revolutionary Party expected to win at the time of going to press, having taken a wide lead in polls last week.
Mr Thompson, manager of the £149m Axa Framlington Emerging Markets fund, said the party would reform the oil sector and encourage more foreign investment. “About a third of Mexico’s tax revenue comes from the nationalised oil sector and the businesses have been starved of money,” the manager said.
“There is more of an acceptance in Mexico of the need for overseas investment, so it would be a positive development which is taken positively by the market.”
He added that Mexico was also benefiting from the rising cost of outsourcing to China, in a reversal of the pattern a decade ago at the peak of firms outsourcing to China. Mr Thompson said: “Part of Mexico’s strength is what’s happening in China. When growth is uncertain companies want shorter supply chains, so sourcing from Mexico is better than paying for shipping from China.”
Mexico is Mr Thompson’s largest overweight position at 9.6 per cent of the portfolio.
Mr Thompson took over the Axa Framlington Emerging Markets fund in December 2010 as a permanent replacement for William Calvert, who left in July 2010 to join Polar Capital.
Since he took charge, the fund has lost 16.8 per cent compared with a sector average loss of 14.2 per cent.