The iShares MSCI Mexico Capped ETF (NYSEArca: EWW) rose 1% Friday after J.P. Morgan revealed an overweight rating on the largest trading partner of the U.S.

EWW’s Friday gain eats into a year-to-date loss that stood at 4% heading into Friday’s session, giving the $2.4 billion ETF a fair chance of finishing the year in the green. That would be no small feat considering the struggles of Latin America ETFs this year.

Single-country ETFs tracking that region have been dismal performers this year. So bad have LatAm ETFs been that EWW is the second-best performer in the group with a 4% loss. The Global X FTSE Argentina 20 ETF (NYSEArca: ARGT) is the only LatAm country-specific ETF to generate positive returns to this point in 2013. [ETFs for Possible World Cup Winners]

EWW’s slack performance is particularly disappointing given Mexico’s proximity to the U.S. and the tendency of Mexican equities to rally in unison with their U.S. counterparts.

One issue that could hinder EWW in the near-term is valuation. Investors that are currently embracing emerging markets are doing so with markets that are discounted relative to the broader developing world, including China, South Korea and Taiwan. [After a Disappointing Year, Advisors Wade Into LatAm ETFs]

Still, J.P. Morgan sees opportunity south of the border.

“We are OW Mexico based on (1) strong forecast economic growth acceleration to 3.4% in 2014E from 1.4% in 2013E; (2) estimated domestic FX appreciation (vs. the USD) through 2014 year-end (MXN12.25 /USD); (3) enhanced cost competiveness and high sustainable growth outlook – the agenda on reforms has advanced; and (4) leverage to an expected US manufacturing rebound,” according to a note from the bank obtained by Barron’s.

If EWW closers lower this year, that will represent the ETF’s third annual loss since 2007. Since its debut in 1996, EWW has only notched consecutive annual losses during one period: 2000-2002.

iShares MSCI Mexico Capped ETF

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