The iShares MSCI Mexico Capped ETF (NYSEArca: EWW) is down more than 8% year-to-date, but compared to other exchange traded funds tracking Latin American economies, EWW’s showing is significantly less bad. In fact, EWW is the only Latin America single-country ETF that has traded higher over the past five years.
Colombia and Mexico, along with Turkey, South Africa and Indonesia, are seen as developing countries overdependent on volatile foreign investment flows. The original fragile five were among the worst off during the taper tantrum of 2013 when foreign investors pulled out of the emerging markets.
In the event of another taper tantrum event, Colombia and Mexico may be among the most exposed to a shift to safety. [Mexico Joins Fragile Five]
However, Mexico’s proximity to the U.S. could once again be an advantage if the Fed announces an interest rate hike next month. Additionally, there are some sectors of the Mexican equity well-positioned to thrive.
In a note out earlier this week, UBS said investors should avoid Mexico on a broad basis, but the bank was constructive on Mexican consumer staples and financial services names, reports Dimitra DeFotis for Barron’s.
The $1.39 billion EWW allocates over 45% of its combined weight to financial services and consumer staples names. Those are the ETF’s two larges sector weights.