Corruption, Falling Oil Pressure Mexico ETF Outlook | ETF Trends

The Mexico country-specific exchange traded fund could be slowing as declining oil revenue and declining business confidence drag on the economy.

The iShares MSCI Mexico Capped ETF (NYSEArca: EWW) has dipped 1.8% year-to-date and fell 2.4% over the past year. Alternatively, the db X-trackers MSCI Mexico Hedged Equity Fund (NYSEArca: DBMX), which hedges against a depreciating peso, pulled back 0.9% year-to-date and rose 8.7% over the past year.

Mexico’s economy is expected to expand a downwardly revised 3.08% this year, compared to an estimated 3.29% a month ago and 3.85% in August, reports Bredan Case for Bloomberg.

The more tempered outlook comes in response to the 50% plunge in oil prices. Finance Minister Luis Videgaray warned that low oil prices could force the government to keep tightening fiscal policies after an spending cut announced in January.

Furthermore, widespread protests over the disappearance and potential deaths of 43 college students and the home-purchase scandals are also weighing on investor confidence.

“Recent domestic developments involving widely reported acts of violence, allegations of official corruption, low oil price environment, and the sluggish performance of the economy may have started to dent confidence indicators,” Alberto Ramos, chief Latin America economist at Goldman Sachs Group Inc., said. “This may turn consumers and businesses more defensive and potentially handicap the pace of the ongoing economic recovery.”