Many Latin American countries have grown extensively over the past decade as a flurry of free trade agreements helped to boost economic activity across the region. Nowhere is this more apparent than in America’s southern neighbor, Mexico. After NAFTA, Mexico moved quickly to secure a variety of free trade agreements with numerous other Latin American nations and eventually the European Union and Japan as well.
The growth of free trade helped the Mexican economy to grow quickly during the past decade; its markets nearly quadrupled before crashing in 2008. Despite this setback and a current GDP outlook that is quite poor, the Mexican stock market is quickly approaching its pre-crash levels, leaving many investors to wonder if stocks can continue to rise despite rampant corruption and an omnipresent drug war that threatens to engulf the nation.
Mexico offers investors access to one of the strangest economies in the world; not only is Mexico home to the world’s richest man, Carlos Slim, but the country has over 18% of its population living in poverty. Furthermore, the country has a diversified economic mix with large allocations going towards both the tourism and mining/basic materials sectors. Despite this diversification, Mexico remains dependent on the U.S. for the vast majority of its trade; close to 80.5% of all exports go to the U.S. and nearly half of the country’s imports come from America, according to the CIA World Factbook. The Mexican economy is truly one of sharp contrasts and hard-to-break habits (also see Ultimate Guide To Latin America ETFs).
With U.S.-Mexico relations in focus as of late, the iShares MSCI Mexico Index Fund (EWW) has become an interesting investment opportunity. EWW is one of the most popular ETFs in the Latin America Equities ETFdb Category; it currently has close to $1.5 billion in assets with average trading volume of close to 3.15 million shares.
EWW is heavily focused on large multi-national stocks, with 43% of holdings in giant caps and 34% is in large caps. Telecommunications and industrial materials make up the two biggest sectors for this ETF, combining to account for more than half of assets. Meanwhile, the fund is significantly underweight in technology sectors; it offers no allocation to hardware or software firms (see more information on EWW’s sector breakdown here). For individual holdings, Carlos Slim’s America Movil (AMX) is the largest holding comprising 23.1% of the fund’s total assets, while Wal-Mart De Mexico (WMMVF.PK) (9.82%) and cement giant Cemex (CX) (5.84%) round out the top three. The fund is up 51.3% over the past 52 weeks, but it has been crushed as of late, posting a loss of almost 6% over the past month. The fund charges an expense ratio of 0.52% (see more fundamentals of EWW here).
Disclosure: No positions at time of writing.