Mexico ETF Goes Great With Chips and Salsa

What better way to celebrate Cinco de Mayo than with a heaping bowl of guacamole, a round or three of margaritas and a Mexico exchange traded fund (ETF)?

The timing is good, too: the iShares MSCI Mexico (EWW) has been gathering steam lately, going up 11.3% since March 10. Year-to-date, it's up 5.8%.

In the last decade, Mexico has delivered annualized returns of 16.99%, handily outpacing other single-country ETFs. The fund is heavily concentrated in the wireless sector, with 25.1% of the fund given to America Movil (AMX), the largest cell phone operator in Latin America.

Today, America Movil stock rose along with some mining companies, Reuters reports. Shares of Grupo Mexico, one of the world's largest producers of copper, shot up in trading today, as well. Grupo Mexico is 5% of EWW.

Mexico has also been given a lift via rising oil prices as the world's sixth-largest crude exporter. Futures rose past a record $120 a barrel today, says John Wilen for the Associated Press. However, over the weekend gas prices fell more than a cent. Don't spend those big savings all in one place.

How to Invest in Single-Country ETFs

Exchange traded funds (ETFs) that track a single country have have been a boon to many long-term investors. They allow investors to reduce their exposure to specific regional disruptions, such as the recent credit crunch, and they up the exposure available to countries that are profiting more than the United States or other distressed nations.

Global growth has been outpacing that of the United States' for some time now. Evidence of this can be seen just by looking at the performance of the S&P 500: year-to-date, it's down 5%. Its five-year average return is 10.6%, and the ten-year average is 3.9%.

Investors can't be blamed for considering looking abroad for places to put their money. Single-country funds offer more flexibility than mainstream equities, says Alan Farley for The Street.

Overnight gaps that can occur in single-country ETFs can subject them to volatility.

iShares MSCI Mexico (EWW) is an example, as it fell nearly 3% on April 25 because of weak earnings from America Movil (AMX). However, over the past decade, EWW has benefited from Mexico's steady growth in the last decade. Year-to-date, the fund is up 3.6%.

Other ETFs with a strong year-to-date performance include iShares MSCI Brazil (EWZ), which is up 12% and has an annualized return of 55.4% over the last five years;  iShares MSCI Taiwan Index (EWT), up 10.2% so far this year, with an annualized return of 18.6% over the last five years.

Brazil was upgraded yesterday by Standard & Poor's to "investment grade."

These uptrends over time with single-country ETFs are all well and good (hindsight is 20/20, right?), but what if you had bought Brazil in November and sold it in January? You would have been down 50%.

But each single country needs to be evaluated on its own merits. Not all of them are going to go up. When it comes to these funds, educate yourself and monitor the trends closely. Have your sell points set for each, letting it go when it either drops below its 200-day moving average or 8% off its high.

If you stick to the plan, hopefully you will achieve your goal of doing well on the uptrends while avoiding the volatility that occurs from time to time.

Mexico and Its ETF Has One Caliente Decade

Nine out of the top ten exchange traded funds (ETFs) with high yearly returns actually tracked overseas markets, with one of the hottest markets and funds just south of the border. That's according to Lipper data.

iShares MSCI Mexico (EWW) gained an annualized 16.99% through April 17, compared to the S&P 500 which returned 3.88% over the same time period.

Jesse Emspak for Investors Business Daily reports that the fund tracks the Bolsa Mexicana, the country's stock exchange. EWW is concentrated, with 25% tracking America Movil (AMX). The company is the largest wireless provider in Latin America, and serves 147 million customers in 16 different countries.

Like so many Latin economies, Mexico has had a steady, modest growth in the past 10 years.

The country is exporting more to Europe and Asia as trade ties have solidified and the peso has fallen alongside the dollar.

Sugar Might Sweeten Agriculture ETF Performance

Sugar is one commodity whose price remains relatively low when compared with historic highs, but it may not remain that way for long, leaving room to grow for exchange traded funds (ETFs).

Take Baltimore's famous Berger cookies, the price of which one woman recently balked at: $4.59. We can personally attest to the worth-it-ness of that price. The cookies are simple: eggs, milk, sugar, flour and cocoa for that delicious mound of chocolate frosting on the top. Really, you should try them.

The price of all those ingredients has soared in recent months - except for sugar. In "real" terms, the price of sugar has been dirt cheap since the late 1980s, reports Graham Summers for Seeking Alpha.

Blame much of it on a bad reputation: sugar rots your teeth, makes you fat and makes your kids swing from the chandeliers.

But the populations of other countries are beginning to get a sweet tooth as they start eating more like we do (heaven help them), contributing to a demand for sugar that has increased 15% since 2002. Demand is beginning to outpace production: consumption has risen 4%, production has risen 1%.

The biggest sugar consumers per capita are, in order: Brazil, Mexico and Australia, according to Daniel Workman for Suite 101.

The London Stock Exchange has a sugar ETF, ticker symbol SUGA. In the United States, there is sugar futures exposure to be had in the PowerShares DB Agriculture (DBA).

Mexico's ETF and Economy Are Worth Some Celebratory Margaritas, With Salt

Experts have warned that Mexico could be the hardest hit of the Latin American countries if the United States enters a full-blow slowdown, causing exchange traded fund (ETF) investors to be cautious.

So far, though, the Mexican economy hasn't shown signs of slowing. The central bank governor said industrial output and investment is expected to remain at healthy levels. Easter, a major holiday in the country, arrived early this year. That means first quarter numbers might be slightly off when compared with the previous time period in 2007.

Many investors in Mexico believe the central bank will make two interest rate cuts during the second half of the year, report Noel Randewich and Alistair Bell for Reuters. However, a recent inflation spurt has given them less room to move. Growth for the Mexican economy this year is expected to hover around 3%, compared with 3.3% last year. Mexico sells 80% of its exports to the United States, so it's a country that is heavily dependent on activity here.

So far, the iShares MSCI Mexico Index (EWW) has been benefiting from Mexico's continued strength. Year-to-date, it's up 10.4%.

Playing the Waiting Game With ETFs

  Some believe we're in a full-blown recession, but no matter what they believe, exchange traded fund (ETF) investors shouldn't panic.

Chris Fichera for Consumer Reports suggests staying put and weathering the storm, while making some tweaks to your portfolio:

• While he does suggest that large-caps are attractive and relatively expensive, it's actually the small- and mid-caps that have been outperforming in the last two weeks. Large-caps are up about 1.7%, mid-caps are up about 2.9% and small-caps are up about 5%. There are a variety of small- and mid-cap funds out there, among them:
  • iShares Russell 2000 Growth Index (IWO)
  • iShares Russell 2000 Value Index (IWN)
  • Vanguard Small Cap Value (VBR)
  • iShares S&P MidCap 400 Value Index (IJJ)
  • PowerShares DWA Technical Leaders (PDP)

• International is still attractive. Europe and Japan are slowing down, but there are still emerging markets out there that are growing rapidly, with still more room to grow. Emerging markets can be volatile, so having an exit strategy here is paramount.
  • iShares MSCI Spain (EWP), up 10.3% since March 10
  • iShares MSCI Malaysia (EWM), up 10.5% since March 10
  • iShares MSCI Mexico (EWW), up 8.3% since March 10

• Go with short- or intermediate-term bonds, as long-term bonds don't have the most attractive yields right now. They would also feel the effects if the Federal Reserve were to cut interest rates further.
  
  • SPDR Lehman Short Term Municipal Bond (SHM)
  • iShares Lehman MBS Bond (MBB)
  • SPDR Lehman Aggregate Bond (LAG)
  • iShares Lehman Intermediate Credit Bond (CIU)
  • iShares Lehman Government/Credit Bond (GBF)
  • Market Vectors-Lehman Brothers AMT-Free Short Municipal Index ETF (SMB)
  • PowerShares Insured National Muni Bond (PZA)

Whatever you do, whether you decide to tweak your portfolio or just sit and wait, stick to your investment plan. Once investors are guided by their emotions is when the real trouble begins.

For disclosure, some of Tom Lydon's clients own shares of EWP.

Emerging Market ETFs Could Be Worth a Look In Rough Times

Is it time for exchange traded fund (ETF) investors to take a trip to emerging markets - or anywhere other than the United States for now?

While some stocks are beginning to stir and the markets have been up so far today, thanks to optimism about the Federal Reserve's most recent rate cut, economists are still ready for a slowdown within the U.S. economy for the latter part of 2008.

The problems within the financial markets, in particular, are spreading into the broad stock market and are causing problems that will not go away overnight. One Moody's economist says the United States is 100% in a recession.

If that's the case, it could be time to seriously look elsewhere until this mess plays out.

Economists are favoring the long-term prospects of Brazil, China and India, reports Murray Coleman for Index Universe. China, in particular, has taken a real hit lately, but the prevailing sentiment is that it's not going to be this way forever. Mexico is showing signs that it's emerged from the U.S.' shadow. Russia's influence in Europe's emerging markets should also be watched.

If you're thinking emerging markets might be right for you, you've got many options once the funds move above their trend lines (200-day moving average):

• iShares MSCI Brazil Index (EWZ), down 4.6% year-to-date
• iShares MSCI Mexico Fund (EWW), down 3.1% year-to-date
• Market Vectors Russia (RSX), down 9.1% year-to-date

North American Neighbors' ETFs Holding Their Own

How has the U.S. economic slowdown impacted North American neighbors and their related exchange traded funds (ETFs)?

America is an important market for Canada and Mexico, and the United States is a major consumer of their exports, accounting for 80%. However, the numbers are slowing along with the American economy, explains  Carl Delfeld for ETF Folio.

According to a recent article in the Financial Times, both Canada and Mexico are more likely to sustain economic woes stemming from the United States than they have in the past. Diversification is the reason, and both countries have a strong domestic demand now that their homeland has strong consumer spending.

• iShares MSCI Canada Index (EWC)

• iShares MSCI Mexico Index (EWW)

Latin America ETFs Have Stability and Growth to Their Name

We're only six weeks into the year, and the U.S. markets and related exchange traded funds (ETFs) have gotten off to a slow start. The domestic markets are down anywhere from 7-12%.

But emerging markets are another story. Sure, they carry more risk, but they also have been holding their ground where relative strength is concerned. Matthew D. McCall for Seeking Alpha points out that iShares Malaysia (EWM) is the only single-country ETF showing a positive return, up 4% year-to-date.

The next three top performers are all in Latin America:

• iShares Mexico (EWW), down 1%
  
• iShares Chile (ECH), down 2.3%
  
• iShares Brazil (EWZ), down 2.5%

Southeast Asian countries are considered of "above average" risk, while others are considered "top heavy" in the political system. In contrast, Latin America looks good because of its relatively stable government, richness in commodities and concentration in growth. In a rough patch, it can be good to look for relative strength in ETFs by comparing them to their peers.

If you can't decide which Latin American country will perform, another route to take is the iShares S&P Latin America 40 ETF (ILF). It has a concentration in materials and energy (52%) in one fund, and year-to-date, it's up 3.4%.

For full disclosure, some of Tom Lydon's clients own shares of EWZ.

Sector Rotation In A Global ETF Portfolio

  Adapting your investment strategy with exchange traded funds (ETFs) is important when economies around the world are becoming more interrelated.

Doing so will add value and increase the chance of outperforming benchmarks, reports  Carl Delfeld for Index Universe. The wheres of a company is also becoming less important as the industries and sectors which it operates is taking center stage.

The basics of global indexing, says Delfeld, are take the S&P Global 1200, a composite of seven indexes that represent leaders in their respective regions. The market values of the 1200 companies in the indexes represent around 70% of the world's capital markets with a market value of $28 trillion or more. Here is a brief breakdown:

• The S&P 500 covers 75% of U.S. markets.
• The S&P Europe 350 covers 70% of the region's market cap across 17 countries.
• S&P/TOPIX 150 covers 70% of the Japanese market.
• S&P/TSX 60 offers exposure to 60 large-cap, liquid Canadian companies.
• S&P/ASX All Australian 50 is comprised of 50 liquid, domestic-oriented Australian companies.
• S&P Asia 50 covers 50 leading companies in Asia ex-Japan domiciled in Hong Kong, South Korea, Taiwan and Singapore.
• S&P Latin America 40 is a basket of 40 companies from Argentina, Brazil, Chile and Mexico which offers exposure to 70% of the regions' market cap. It is heavily weighted to Brazil and Mexico.

By using a top-down macro analysis of studying market-cap global sector weightings, a global sector rotation method can be useful in a growth portfolio. The weakness is that smaller countries get less weighting, and the traditional market-cap weighting which gives trademark exposure to emerging markets.

Brazil ETF Shaking Things Up

It is hard to determine what moves a broad group of stock so much that an exchange traded fund (ETF) will move sharply, but one factor could be that the major holdings are concentrated. This can lead to volatility.

Emerging market and country-specific funds are particularly prone to that correlated effect. iShares MSCI Brazil Index (EWZ) is an example, as just in the last 24 hours there have been multiple things going on in Brazil:

• Goldman Sachs gave Brazilian bank stocks an “attractive” rating
• Yesterday’s inflation number was lower than expected
• Industrial output numbers for 2007 were released, and it was a better-than-expected 6%
• Soybean and corn production will rise more than previously forecasted in an attempt to meet demand.

Will Swarts for SmartMoney reports that while ETFs are great vehicles for short-term traders, that doesn't necessarily make EWZ efficient for smaller-scale investors. Small investors shouldn't sweat the day-to-day movement so much.

By watching the 200-day moving average and seeing how an ETF is performing relative to that range, it's easy to set up stop-loss orders and avoid any sort of sudden collapse, which is a worry for emerging markets investors.

You have to take a longer view with an ETF as an individual investor. You're basically buying an index and that's a very easy way to get some diversification.

Brazil is hitting all the sweet spots right now, but that's not going to happen all the time. Emerging markets have had a great run and the growth in these regions will continue.

Latin America, overall, has been showing nice performance since Jan. 22:

Latin America Discovery Fund (LDF), up 13.8%
iShares S&P Latin America 40 Index (ILF), up 12.1%
iShares MSCI Mexico Index (EWW), up 10.5%

Mexico Will Put Billions Into Infrastructure - ETF Might Say 'Ole!'

Mexico will soon start pouring money into its infrastructure, benefiting its economy and exchange traded funds (ETFs).

On Monday, Doug Krizner and Dan Grech for Marketplace report, President Felipe Calderon will make his first presidential visit to the United States. He's planning to visit Mexican communities in Los Angeles, Chicago, Boston and New York in an effort to chart a more independent course for Mexico's economy.

He's even more motivated to do that now that the United States is headed for a recession.

As we said yesterday, countries tend to pour money into improving the infrastructure when the economy gets tough. President Calderon has budgeted $25 billion to build highways, bridges and other projects to ensure that his country doesn't have to depend on the U.S. economy as much.

So far, they appear to be on the right track.

The Mexican peso is strengthening: it rose to a three-month high on Friday after investors bet that the Federal Reserve will cut its benchmark rate in March. Investors who believe the peso will continue its upward trend can hedge the falling dollar with the CurrencyShares Mexican Peso Trust (FXM).

Mexico's Central Bank cut projections for growth in 2008 by nearly a percentage point. The iShares MSCI Mexico (EWW), however, is up 9.8% year-to-date. Since Jan. 22, it's been up 7.5%. The fund is currently residing below its trend line, though. If President Calderon's plan to boost his country's infrastructure is a success, it could make this fund one to keep an eye on.

The Falling Dollar and Currency ETFs

It is no secret that the U.S. dollar has been falling against other major currencies, as evidenced by exchange traded funds (ETFs) and related investments.

The dollar's value dropped 10% against the euro, and is down 40% from its October 2000 high. David Kathman for Morningstar reports that the dollar also dropped 6% versus the Japanese yen and also hit a 25-year low against the British pound. The pound, as we said earlier today, has fallen on some hard times of its own.

Essentially, this means the investors around the world have lost confidence in the future stability of the dollar, and, as a result, they are more confident in currencies such as the euro. Effects of the weakening dollar are complex, but the good side is that foreign buyers can come into the U.S. and spend their money. With the dollar's weakness, these ETFs have posted great returns the past couple of years (the percentage that follows is their one-year performance unless otherwise noted):

• CurrencyShares Australian Dollar Trust (FXA), up 19.4%

• British Pound Sterling Trust (FXB), up 5.3%

• Canadian Dollar Trust (FXC), up 19.1%

• Euro Trust (FXE), up 18.7%

• Japanese Yen Trust (FXY), up 8.3% since inception

• Mexican Peso Trust (FXM), up 6.5%

• Swedish Krona Trust (FXS), up 14%

• Swiss Franc Trust (FXF), up 16%

Performance chasing is generally not a good idea, especially since currency movements are unpredictable and volatile. Do your research first.

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

No Siesta For Mexico And Its ETF

Has the iShares MSCI Mexico Index (EWW) exchange traded fund (ETF) been taking a short siesta?

Apparently not, as the ETF outdid the general market last year, up 12.9%. Many of the best stocks from Mexico don't actually derive all their revenue or profits from the country, reports Dave Mock for The Motley Fool.

Some of the companies that are caliente en Mexico are:

• America Movil, 24.15% assets
• Coca-Cola FEMSA (KOF), 0.93% assets
• Wal-Mart de Mexico, 5.41% assets
• Grupo TMM (TMM)
• Grupo Simec (SIM)

A look at Coca-Cola shows that KOF is the world's second largest Coca-Cola bottler, but the Mexico-based company is driven by a wide range of distributors in Latin America, producing 40% of the case volume sold. GrupoTMM trucks around lots of these bottles and provides maritime and trucking transportation services. The company is full-force in its turnaround efforts, to improve spending and operations.

Recent quarter sales show that more than 73% of sales growth came from regions outside of Mexico. But Mexico still makes up most of the company's revenue - 52.6% of it in 2006.

Latin America and Its ETFs On the Upswing

There's been a lot of talk about Asia's performance this year, but Latin America and its exchange traded funds (ETFs) that have been performing nicely too.

PlanetQuant crunched the numbers and released their Global Equity Scorecard this week. They write on Seeking Alpha that the iShares MSCI Pacific ex-Japan (EPP) is down 9.1% for the past month, and some of the Asian country-focused ETFs declined in the same time period, including iShares MSCI Taiwan Index (EWT), iShares MSCI Australia Index (EWA) and iShares FTSE/Xinhua China 25 Index (FXI). EPP is up 19% year-to-date.

It's Latin America that has become a star in the emerging markets sector. iShares S&P Latin America 40 Index (ILF) is down only 0.2% for the past month and up 45.9% year-to-date. Brazil has the highest return of any of the countries: the iShares MSCI Brazil Index (EWZ) is up 69.5% year to date. Even the iShares MSCI Mexico Index (EWW), once ranked low on the scorecard, is creeping up. PlanetQuant says volatility in Latin America has risen, but it's not as high as that in China or the Asia Pacific ex-Japan.

Plentiful natural resources in Latin America may help it remain a strong performer for the near future.

Emerging Market ETFs Hit the Market - In Mexico

Barclays Global Investors released their first locally traded exchange traded funds (ETFs) for emerging markets. The launch of four Mexico-based iShares is proof of the ever-growing international markets. The four ETFs are traded like stocks on the Mexican stock exchange and track the local stock market's Composite, Large-Cap index, Mid-Cap index and the Habita Index, according to CNN Money.

Around 37 billion pesos or $340 million, of the ETFs were sold in the initial public offering. Barclays chose Mexico because of it's prior success with the U.S.-based iShares that are already trading on the Mexican market. The principle clientele on the Mexican market for these ETFs are the country's pension fund managers.

It's Fiesta Time for Mexican ETF

Mexico's exchange traded fund (ETF) iShares MSCI Mexico Index (EWW) has been trending upward lately. Currently, it's up 21.9% year-to-date.

One of the factors behind EWW's rise is Mexico's Bolsa index's rise to a new high on Thursday. The Bolsa Index was recovering from August's worldwide selloff, as confidence in earnings and economic growth was bolstered by an upgrade of the country's credit rating earlier this week, reports William Freebairn and Paulo Winterstein for Bloomberg. The index increased 1.8% partly thanks to America Movil SAB's announcement of a special dividend. Mexico's credit rating was raised to a BBB+ from the Standard & Poor's Ratings Services. The upgrade was because tax legislation last month seemed to boost the economy. Also, Wal-Mart de Mexico SAB, the nation's largest retailer, reported better-than-expected third-quarter results earlier this week, which seems to have sparked a rally in retailers.

Mexican stocks took longer than those in Brazil and the U.S. to recover from a global rout in August on credit market concerns. However, now that they're back up, we'll have to watch and see if EWW's run will continue.

Carlos Slim Controls Mexico ETF (EWW)

Carl Delfeld for ETF XRAY submits: It should be no surprise to sophisticated global investors that many of the emerging-market country exchange traded funds are dominated by the top weighted companies in the index. But behind iShares MSCI Mexico Index (EEW) is the incredible story of one man, Mr. Carlos Slim, arguably the wealthiest man in the world.

In an excellent article in the Financial Times by Adam Thomson is a description of his empire that makes up more than a third of Mexico's stock exchange index capitalization. According to Forbes, which last put his fortune at $53.1 billion, Mr. Slim's net worth last year increased by $19 billion, or $52 million a day. That is one hell of a cash cow.

At the core of his empire are Telmex and América Móvil (AMX), his telecommunications giants. These two companies alone make up 35% of EWW.

Telmex dominates the landline telephone business in Mexico, accounting for more than 90% of the market. It is also extremely profitable: Thomson points out that every year it generates enough in top-line earnings to pay for its original acquisition price. Somehow Mr. Slim was able to persuade the Mexican government to allow him to enter the wireless market, a business he would later spin off into América Móvil, which he controls.

The company has increased its subscriber rate by an average of 65% a year since 2000, according to Mr. Slim, and now has more than 125 million clients in more than ten countries. The company obviously has been extremely active and successful in penetrating tough but lucrative emerging markets all over the world.

Companies like Telmex and America Movil are in many ways ETFs already being a basket of companies under one roof.

Political Events Can Impact Emerging-market ETFs

Emerging markets and their exchange traded funds (ETFs) appear as if they are stabilizing despite the subprime storm. iShares MSCI Emerging Markets Index (EEM), for example, is up 5.6% since the market low on August 15 and is up 0.3% for the last three months. Economic growth, an increasing middle class and political stability have been some of the largest influential factors in helping these areas begin to rebound.

While it's clear the global credit crunch has affected these ETFs, if political strife were to envelop an emerging-market country, it could have far worse effects, says Carl Delfeld for ETF XRAY. Take Thailand for example. When its military launched a coup against the country's prime minister, several Asian ETFs dropped. Investors who are invested in emerging markets need to watch political events in those countries closely as these ETFs can be more susceptible to political influences. Some other emerging-market ETFs that launched in March include:

• SPDR S&P Emerging Markets (GMM)
  This ETF has more than 1,500 companies across 26 emerging countries. It's up 1.4% for the last three months.
• SPDR S&P Emerging Latin America (GML)
  This ETF includes companies based in Argentina, Brazil, Chile, Columbia, Mexico, Peru and Venezuela. It's down 3.3% for the last three months.
• SPDR S&P Emerging Middle East & Africa (GAF)
  GAF includes companies based in Egypt, Israel, Jordan, Morocco, Nigeria and South Africa. It's down 8.1% for the last three months.

Current Affairs Affect Latin American ETFs

Although the iShares S&P Latin America 40 Index (ILF) exchange traded fund (ETF) is down 16.1% for the month, it's up 12.3% year-to-date and generally has been a strong performer for most of this year. ILF's main components are Brazil at 59.8% and Mexico at 29.5%. The country-based ETFs for these countries, iShares MSCI Brazil Index (EWZ) and iShares MSCI Mexico Index (EWW), up until the last month or so, have had similar results as ILF. Looking at current events provides clues for what might be causing these ETFs to vary.

Latin America's growing middle class has helped generate market reforms as well as build a strong foundation for education, political stability and urbanization, says Carl Delfeld for ETF XRAY. According to The Economist, the incomes of the poorest half of the populations are growing faster than the average in Brazil and Mexico. This means poverty is falling, and income distribution is starting to become lass unbalanced.

However, Hurricane Dean is on Mexican President Felipe Calderon's mind, as it was a top-scale Category 5 storm when it hit Mexico's Yucatan Peninsula today, according to John Pain for the Associated Press. The hurricane caused Calderon to leave early from a meeting with President Bush and Canadian Prime Minister Stephen Harper to discuss creating closer ties and fighting terrorism.

Can Mexico's Economic Growth Lift Its ETF?

It seems no country-based exchange traded fund (ETF) can hide from the market's recent, sharp decline, not even our neighbor Mexico. Although the iShares MSCI Mexico Index (EWW) is down 16.6% for the month, it's up 4.3% year-to-date.

The market decline can make it difficult to see Mexico's economic progress during the second quarter. The country's economic growth grew most likely because of the U.S.'s demand for exports, according to Patrick Harrington for Bloomberg. Construction output rose 1.2%, and GDP grew 2.9% annually in the quarter. However, Mexican interest rates are at 7.25% as a "preventative" measure to offset rising food costs. In July, the price of tomatoes, milk, avocados and other Mexican consumer prices rose 4.1%, which is its largest increase in six months.

ETFs and Redemptions Week

Last week market declines had an impact on exchange traded funds (ETFs), reports TrimTabs in Forbes. U.S. equity ETFs lost $5.7 billion, while global equity ETFs redeemed $586 million, which is the first outflow in eight weeks.

The lead U.S. equity redeemer was the Spiders (SPY), at 10.7% of assets. iShares MSCI Emerging Markets (EEM) was the leading redeemer for global ETFs at 4.5% of assets. The leading issuers were the Cubes (QQQQ) at 3.5% of assets and iShares MSCI Taiwan (EWT), which issued 1.8% of assets.

For full disclosure, some of Tom Lydon's clients own EWT.

Emerging Market ETF is the New Sample Platter

With so much growth in various emerging markets and their exchange traded funds (ETFs) around the world, how are you supposed to choose where to invest?

Consider the BLDRS Emerging Markets 50 ADR Index (ADRE); it has little of everything. Another bonus is that it's up 26.9% year-to-date. ADRE's top 10 holdings are from some of the best-performing emerging markets.

1. America Mobile (AMX) - makes up 5.7% of ADRE; Mexico
2. Taiwan Semiconductor Manufacturing (TSM) - makes up 5.3%; Taiwan
3. China Mobile (CHL) - makes up 4.8%; China
4. Petroleo Brasileiro (PBR) - makes up 4.4%; Brazil
5. Posco (PKX) - makes up 4.2%; South Korea
6. Companhia Vale Do Rio Doce - makes up 4.2%; Brazil
7. Kookmin Bank (KB) - makes up 3.8%; South Korea
8. Teva Pharmaceutical Industries (TEVA) - makes up 3.8%; Israel
9. Petroleo Brasileiro (PBR) - makes up 3.6%; Brazil
10. Infosys Technologies (INFY) - makes up 3.5%; India

Emerging Market ETFs Lead the Way

Emerging markets and the exchange traded funds (ETFs) that track them have displayed the best one-year performances so far. Lipper data gives iShares FTSE Xinhua/China 25 Index (FXI) the top spot. Despite its February dip, it has one-year gains at 77.8%. The other hot performers were:

• iShares MSCI Mexico (EWW) 66%
• iShares MSCI Malaysia (EWM) 66.7%
• PowerShares Golden Dragon Halter USX China (PGJ) 68.5%
• iShares MSCI Brazil (EWZ) 69.1%

Strong markets and big inflows pushed up the stocks' prices, which in turn drove up some of the underlying indexes, reports Jesse Emspak for Investor's Business Daily. Economies that centered around natural resources did well over the past year, partially because of the increased demand for commodities like copper and oil. However, buyer beware: Many of the emerging market ETFs that rolled out recently divide the markets into narrower slices. While this could increase the overall volatility, emerging markets ETFs continue to be popular and post favorable returns.

Mexico ETF Rides Investment Wave

Mexico's mutual funds could see another year of double-digit growth due to stable interest rates and the transfer of traditional bank deposits to funds - perhaps exchange traded funds (ETFs) will appeal to investors as well.  The dynamics of the fund industry could help it grow about 35%. Funds have prospered from two years of solid growth as falling interest rates have made funds more attractive in comparison to low-yielding certificates of deposit and savings accounts offered by the country's banks, reports Ken Parks for The Wall Street Journal.  The Bank of Mexico has lowered rates to 7% for overnight lending and this has helped the industry grow 38.2% year-over-year. In Mexico, local investors are more into diversification instead of timing the market. Here in the U.S., we can use iShares MSCI Mexico (EWW) to benefit from the country's growth. It is up 23% year-to-date.

Latin America ETFs Post Inflows

China may be the topic of the day, but looking at the Latin American exchange traded funds (ETFs), that is where things are moving.  While China saw fund outflows this month, Latin American funds were the only emerging market funds to post inflows.  iShares FTSE/Xinhua China (FXI) is down 0.2% year-to-date, while iShares S&P Latin America (ILF) is up 24%.

Trang Ho for Investor's Business Daily compares Latin American focused ETFs.  SPDR S&P Emerging Latin America (GML) is up 14% since its March birth date. Both ILF and GML have more than half their weight in Brazil, followed by Mexico, Chile and Argentina.  GML does contain small positions from Peru, Columbia and Venezuela.

Looking at the individual countries, iShares MSCI Brazil Index (EWZ) is up 27%, while iShares MSCI Mexico Index (EWW) is up 23%.  Some favor Mexico to Brazil due to a better transparency in financial reporting.  Brazil doesn't have local monetary policy and the tax laws need updating.  However, Mexico's economy may be affected in the short term by the political transition, which has delayed execution of the federal budget, and slowed private investment and consumption decisions.  Mexico's projected GDP growth for this year is 2% and 4% for next year.  Brazil's GDP is estimated to grow 4.3% this year and 5% next year.

For full disclosure, some of Tom Lydon's clients own ILF.

Latin American ETF Es Caliente!

Latin American exchange traded funds (ETFs) have already earned double-digit gains in less than half a years time. Many have set new record level highs during the past week and are expected to keep up their stellar performance. iShares Latin American Index(ILF) is up 23% year-to-date and gives 88% of its basket to Mexico and Brazil. Boasting strong exports, higher foreign exchange reserves, high commodity prices, political stability and ripe corporate earnings and valuations makes these countries stand out from the crowd. Carl Delfeld for ETFXRAY.com further adds that Chile is the star of Latin America due to pro-market policies (Chile makes up 8% of ILF) and Peru has been the best performing market in the entire world thus far.

EWW Mexico ETF Rise With Elections

The Mexican elections might be helping out the Mexico exchange traded fund (ETF).  iShares MSCI Mexico Fund (EWW) reached new highs this week and has been on a steady rise since mid-June.  Joanne Von Alroth of Investor's Business Daily points out that the rise coincides with the July election of President Felipe Calderon, a conservative who continues free-market policies of the past administration.  He has not implemented new policies since his inception in December, but investors seem confident his leadership will be good for the country.  One area of focus is a crackdown on drug cartels to lower the violence in the country.

EWW rose 43% in 2006 and is up 6% this year. The largest holding is America Movil (AMX), makes up 24% of the ETF.  AMX is a wireless phone company with over 93.3 million customers in 14 countries.

For full disclosure, some of Tom Lydon's clients own EWW.

Top Performing ETFs for 2006

Once again, global exchange traded funds (ETFs) were the top performers for 2006. 

Booming economic growth in China helped push the China ETFs to the number one and two spots for the year.  iShares FTSE/Xinhua China 25 Index (FXI) and PowerShares Golden Dragon Halter USX China (PGJ) were up 81% and 51% respectively.  Part of the growth in China is due to cargo - manufactured goods need to move throughout, in and out of the country; construction - infrastructure needs to be built; and consumers, also known as chuppies - consumption of high end goods is the current trend.

On the other side of the globe, Spain was one of the fastest growing economies in Europe, due to a wave of mergers and acquisitions, a surge in construction and a real estate boom.  All factors helped boost iShares MSCI Spain (EWP) ending the year up 48%.

Back in Asia, doing business with your neighbor certainly can be a plus, as it was for Singapore.  The country has the the world's busiest port and enjoys a healthy economy.  iShares MSCI Singapore (EWS) represents the region and was up 43% for the year.

Mexico made the top performing list last year and does so again in 2006.  iShares MSCI Mexico (EWW) was up another 43% this year.  Even with uncertain election results for part of the year, the Mexican economy boomed with abundant trade and infrastructure development.

Since China took up the top two spots we thought we would include number six, iShares MSCI Sweden (EWD), up 42%.  Sweden's economy was strong this year, even with an election this past fall.  The ETF has a bit of exposure to financial service companies, which were key performers for the year.

For full disclosure, some of Tom Lydon's clients own FXI, EWS and EWW.

Emerging Market ETF Investing

Exchange traded funds (ETFs) have made investing abroad more comfortable. Looking at one-year performance, most of the top ten ETFs are emerging markets.  They include iShares MSCI Mexico (EWW), iShares MSCI Austria (EWO), iShares MSCI Brazil (EWZ) and iShares MSCI Singapore (EWS).

We talked to Donald Gold of Investor's Business Daily about how investors should know what they're getting into; during challenging times, foreign ETFs are more volatile. Investing abroad doesn't ensure protection from a weak U.S. market, and a foreign markets' decline will be harder than ours. To protect against steep losses you should sell out if an ETF breaks below its 200-day moving average or falls 8% from its peak, whichever comes first.

It's wise to check an ETFs top holdings. Just because it says "China", it might not offer the diversification you're looking for. For example, iShares FTSE/Xinhua China 25 Index(FXI) represents the 25 biggest Chinese companies listed on London's Financial Times Stock Index.

Latin American ETFs Lead for Month

Latin American exchange traded funds lead the pack for the past month.  Below are the ETFs in the region and how they have performed over the past month.

• iShares S&P Latin America 40 Index Fund (ILF) +14%
• iShares MSCI Brazil (EWZ) +15%
• iShares MSCI Mexico (EWW) +12%

For full disclosure, EWW is held in some of Tom Lydon's client portfolios.

                                    

Mexican ETF (EWW) Booming

The exchange traded fund, iShares MSCI Mexico (EWW) is benefiting from the country's stable currency, abundant trade and infrastructure development.  The ETF is up 24% year-to-date and 15% over the last three months after the May correction and a key presidential election.

Juan Carlos Arancibia writes that Mexican imports into the U.S. are growing faster than those from China.  He also notes that mobile telephone service is booming throughout Mexico as wireless provides better service and delivery than landlines.  The top holding in the EWW ETF is America Movil (AMX), a wireless service provider.

For full disclosure some of Tom Lydon's clients hold EWW.

Foreign ETFs Are Back

After a drop of 15-35% from mid-May to mid-June, exchange traded funds specialized in Europe, Latin America and Asia are back to where they were before the sell-off and close to reaching new highs.  The 6-month chart below shows how iShares MSCI Japan (EWJ), iShares MSCI Mexico (EWW), iShares FTSE/Xinhua China 25 Index (FXI) and iShares EMU Europe (EZU) have come back.  Each of these ETFs are trading above their 200-day moving average.

For full disclosure some of our clients currently own EWW, FXI and EZU.

Latin American ETFs on the Comeback

In the last month, Latin American markets have come back from their drop in May.  Exchange traded funds representing the region are the top performers over the last month.  iShares MSCI Mexico (EWW) is up 17% for the month and iShares S&P 40 Latin America Index (ILF) is up 12%.

Top holdings in ILF are Mexican and Brazilian companies, such as Petrobras (PBR), an oil company, America Movil (AMX), telecommunications and Cemex (CX) a cement company.  Materials companies make up a large component of the ETF as well and these mining businesses are reaping the rewards for gold, copper and aluminum demand.

Today the region is relatively stable and improving with economic development.  Inflation is somewhat contained and currencies are stable.

Mexico ETF (EWW) Winning Election

Even with election turmoil, the Mexican market has held up well and so has the exchange traded fund, iShares MSCI Mexico (EWW).  The apparent victory of Felipe Calderon as Mexico's president has given the markets a boost.  Country analysts say that if Calderon's policies take hold the peso and stocks could gain more ground.  EWW is up 9.8% for the month and 4.7% for the year.

ETF Trends - Mexico (EWW) and the President

The Mexican market had a ride this week, as markets rose and fell based on the leader in Sunday's elections.  In the Mexican presidential race, the market favorite, Felipe Calderon, was declared the winner on Thursday.  But his rival, Andres Manuel Lopez Obrador wants to challenge the vote count to the high court.

iShares MSCI Mexico (EWW), an exchange traded fund, which represents Mexico, was up 4% on Thursday, but then concern over what the courts would say about the presidential winner, sent the markets down on Friday.  The ETF finished the week up almost 5%.

Single Country ETFs On Fire!