Money managers are starting to take an interest in Mexico and Chile as consumer spending picks up. Retail investors can also access the two markets through country-specific exchange traded funds.
For example, ETF investors can use the iShares MSCI Chile Capped ETF (NYSEArca: ECH) and the iShares MSCI Mexico Capped ETF (NYSEArca: EWW) to track MSCI indices that follow Chilean and Mexican equities.
Investors can use the SPDR MSCI Mexico Quality Mix ETF (NYSEArca: QMEX) to track a more customized basket of Mexico stocks that were selected based on metrics like value, quality and low volatility.
Additionally, the db X-trackers MSCI Mexico Hedged Equity Fund (NYSEArca: DBMX) and the recently launched iShares Currency Hedged MSCI Mexico (NYSEArca: HEWW) provide exposure to the Mexico’s market without the added currency risk of a depreciating peso currency. [iShares Unveils Massive Expansion to Currency Hedged Suite]
In a recent regional survey conducted by FT Confidential Research, portfolio managers are favoring Chilean and Mexican clothes retailers, supermarket chains and shopping mall groups due to rising consumer sales and improving economic conditions, reports Lucinda Elliott for the Financial Times.
The country-specific ETFs also hold significant exposure to the consumer sectors. For instance, EWW includes a hefty 22.1% tilt toward the consumer staples sector, along with 11.5% toward consumer discretionary names. ECH, though, has a smaller 9.1% tilt toward consumer staples and 7.6% in consumer discretionary.
Spending in each of the countries was slightly up over the second quarter year-over-year.
In Mexico, retail sales are strengthening as consumers shift to more formal outlets. For instance, same-store sales at Walmex, Mexico’s unite for discount retailer Walmart, rose to 7.5% in May, beating expectations of 4% to 5% month-over-month growth.
Meanwhile, in Chile, the economy is picking up speed and expanding quicker than it had in 2014.
Of the 20 fund managers surveyed, 11 were overweight Mexico, compared to nine in December, and 10 were overweight Chile, up from three.
“That gradual growth we’ve been talking about over the last two years is picking up pace,” Will Landers, head of LatAm equities at BlackRock, said in the FT article.
For more information on the Latin American economies, visit our Latin America category.
Max Chen contributed to this article.