Monex structured product volumes buckle

Monex sold MXN56 billion (US$2.8 billion) in structured products during the first quarter of 2021, a steep decline from its volume of MXN116 billion in the same period of 2020, SRP data shows.

Monex’s product issuance has remained steady over the past year decreasing to 803 (MXN34 billion) in the second quarter of 2020 from 988 in Q1 20.

This number recovered during the following quarter to total 1,096 products while sales were boosted to value MXN46 billion. Issuance fell once again to 960 at the end of the final quarter of 2020 and picked up in Q1 21 to total 973.

If markets stay quite stable with low vols like now the products betting on ranges of FX will continue to prevail - Ricardo Guido

“We are seeing clients looking for short term products (7 and 14 days) that can improve their portfolio performance,” Ricardo Guido, (pictured) director at Monex, told SRP, adding that directional bets in FX via step up note as well as capital protected products in FX such as wedding cakes were on demand during the first quarter.

Monex remains the most dominant structured products issuer in the Mexican market, followed by BBVA Bancomer with 377 products worth MXN16.9 billion, Citi with an issuance of 57 products valued at MXN5.2 billion, Santander with 53 products worth MXN1.9 billion, and Scotiabank with 17 products worth MXN1.2 billion.

Of the structured products issued by Monex in Q1 21, two structured bond wrappers are live with strike dates of 29 January 2021, and 17 March 2021, respectively. Both products are dual currency notes with short-term maturities and are tied to the USD/MXN currency pair.

“We think that our volume will keep growing at the good pace we have seen in the last years,” added Guido. “If markets stay quite stable with low vols like now the products betting on ranges of FX will continue to prevail. As the interest rate cuts of Banxico appear to be finished we could probably have some opportunities to issue bets on TIIE possible hikes in the future.”

Regarding ESG activity, Guido noted that it is still very new in Mexico with some green bonds starting to appear but “no market for structured products yet”.

Revenues

Monex has reported accrued net revenues of MXN2.1 billion during the first quarter of 2021, which represents a decrease of 9% compared to the same period in 2020 while net income at the end of the first quarter of 2021 stands at MXN336m.

Of the total volume of operating revenues, 42% lie in domestic foreign exchange operations, 23% in foreign exchange operations from international subsidiaries, 11% in credit and deposits, and 6% in securities brokerage and trading services.

Total operating revenues of credit and deposits reached MXN226m at the end of the first quarter of 2021, reflecting an increase of 54% compared to the same period in the previous year.

Operating revenues of securities brokerage and trading services reached MXN122m at the end of March 2021.

Foreign exchange operations in Mexico reached MXN905m at the end of March 2021, which is equivalent to the figure reported in the same quarter of 2020.