ETF Trends
ETF Trends

While one ratings agency outlines a pessimistic outlook for Mexico, the economy has jumped back from one of its worst recessions on record, and reports of upward revisions in growth could translate to a good year for Mexico country-specific exchange traded fund (ETF). Of course, there is still one lingering problem…

But first, the good:

  • An indicator for Mexico’s total economic output rose 0.5% in last October, or up 4.3% year-over-year, reflecting a preview of economic growth that was faster than previously expected for the fourth quarter, reports Jason Lange for Reuters.
  • Central Bank Gov. Agustin Carstens stated that the economy will soon maintain sustainable growth that could fuel inflation, but analysts suspect that the Central Bank will hold interest rates steady in the short-term.
  • A number of new jobs have been created, chipping away at the high unemployment rate, though many acknowledge that far more is needed to consider Mexico “recovered.”
  • Finance Minister Ernesto Cordero could raise Mexico’s growth forecast from the current estimates of 3.9% on improved U.S industrial production and internal demand, write Carlos Manuel Rodriguez and Crayton Harrison for Bloomberg.

Drug violence, however, continues. Fitch Ratings recently commented that “the rising wave of drug-related violence [in Mexico]appears to be dampening confidence, retail and commerce activities, possibly weighing on a more robust investment and economic outlook,” reports Walter Brandimarte for Reuters. Fitch currently holds Mexico at a BBB foreign-currency debt rating.

For now, iShares MSCI Mexico (NYSEArca: EWW) is undeterred by such risks; in the last three months, it’s up 12%, and in the last year, it’s up 23%. Its top sectors -telecom and consumer staples, which together account for 50% of the ETF – are more reliant on domestic demand, so this fund could continue to power on despite the negatives.

For more information on Mexico, visit our Mexico category.

  • iShares MSCI Mexico (NYSEArca: EWW)

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.