ETF Trends
ETF Trends

For the long-term investor, the iShares MSCI Mexico Capped ETF (NYSEArca: EWW) has been a  winning bet. At least compared to broader emerging markets benchmarks and rival single-country Latin America ETFs.

Over the past three years, EWW is up nearly 20% while the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) is off3.3%. Over the same time, the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) has plunged more than 30% while the comparable Chile and Peru ETFs sport an average three-year loss north of 24%. [Some Bright Spots for Emerging Markets ETFs]

Add to that, EWW was one of the least volatile among those ETFs. The abridged version of the EWW story is as follows: The Mexican economy is forecast to grow 4% in 2013, more than Brazil and Chile. The banking sector is vibrant. The country is stealing manufacturing jobs from China due to proximity to the U.S.

Since the Mexican economy is export driven, some of its success depends on the health of developed nations such as the U.S. That has worked well this year as U.S. growth has been steady if not spectacular. Additionally, Mexico is showing some willingness to opening its long-closed energy industry to foreign investment. [Mexico ETF Boosted by Expanded Economy]

Those impressive fundamentals may have already been priced into the $2.4 billion EWW because the ETF has been a real emerging markets laggard in recent weeks. Since August 23, around the time emerging markets ETFs started to bottom, EWW has lost 3.7%. Over the same time, EEM is up almost 8%. EWZ has jumped 10.7%.

Single-country funds for Colombia, Chile and Peru are all in the green over a time period when EWW has slipped. EWW has also been noticeably more volatile than EWZ, an ETF with a three-year standard deviation of 26.34%.

EWW now faces a precarious technical situation. The chart below from TradeWithPete indicates that if EWW cannot hold in the $62-$63, it could retest its June/July lows.  EWW resides 8.7% below its 200-day moving average, an area that has acted as resistance twice in recent months.