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Contrarian, macro, hedge fund manager, Emerging Markets
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Summary

  • Mexican economy is improving due to a variety of political and economic reforms such as free trade and energy reform.
  • Growth of consumer society and more competitive manufacturing to China are long term catalysts.
  • Technical picture for Mexican ETF is weakening.

As I have mentioned in previous research, the Mexican economy has been on the upswing and the dominant market share of leading companies allows for high profitability. In the video below, I mention the continiuing fundamental evolution of the Mexican economy and the development of its consumer society. The video also elaborates on the case for Mexican stocks (NYSEARCA:EWW).

While the fundamental picture remains strong for longer term investors, technical momentum may be setting up for a buyable correction. Momentum indicators on the daily timeframe such as the MAC-D and stochastics have crossed negative. Even in the context of today's sharp pullback, the weekly 14 period RSI indicator is still stretched at 75. Mexican stocks have been an indirect beneficiary of US monetary easing, so signs of tightening by the Fed or an improved US stock market can lead to a sell off south of the border as well.

Overall, my outlook remains bullish on Mexican stocks and the economy, but a developed market sell off can carry over and provide a good longer term buying opportunity.

Source: Mexican Stocks Still A Good Buy